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VitalAid Inc. manufactures a vacuum-sealed high-protein food supplement that it sells to food aid organizations around the world. The company uses variable costing in
VitalAid Inc. manufactures a vacuum-sealed high-protein food supplement that it sells to food aid organizations around the world. The company uses variable costing in conjunction with a standard costing system and has established the following standards for one package of VitalAid bars: Standard Quantity or Hours Standard Price Standard or Rate $12.00 per kg Cost $4.20 $13.00 per hour 3.25 $1.60 per hour 0.80 $8.25 Direct materials Direct labour 350 grams 0.25 hours Variable manufacturing overhead 0.5 hours Total standard variable cost During October, the company recorded the following activity relative to production of VitalAid: a. The company produced 4,000 packages during October. b. A total of 1,800 kilograms of material was purchased at a cost of $19,800. c. There was no beginning inventory of materials; however, at the end of the month, 300 kilograms of material remained in ending Inventory. d. The company employs 5 people to work on the production of VitalAid. During October, each employee worked an average of 185 hours at an average rate of $14.00 per hour. e. Variable manufacturing overhead is assigned to VitalAid on the basis of direct labour-hours. Variable manufacturing overhead costs during October totalled $1,850. The company's management is anxious to determine the efficiency of the VitalAld production activities.
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