Wonderful! Not only did our salespeople do a good job in meeting the sales budget this year, but our production people did a good job in controlling costs as well," said Kim Clark, president of Martell Company. "Our $15,400 overall manufacturing cost variance is only 4% of the $1,536,000 standard cost of products made during the year. That’s well within the 3% parameter set by management for acceptable variances. It looks like everyone will be in line for a bonus this year."
The company produces and sells a single product. The standard cost card for the product follows:
Standard Cost Card—per Unit
Direct materials, 4.50 feet at $3.80 per foot $ 17.10
Direct labor, 1.7 direct labor-hours at $11 per direct labor-hour 18.70
Variable overhead, 1.7 direct labor-hours at $2.50 per direct labor-hour 4.25
Fixed overhead, 1.7 direct labor-hours at $5.50 per direct labor-hour 9.35
Standard cost per unit $ 49.40
The following additional information is available for the year just completed:_________
a. The company manufactured 15,000 units of product during the year.
b. A total of 65,000 feet of material was purchased during the year at a cost of $4.00 per foot. All of this material was used to manufacture the 15,000 units. There were no beginning or ending inventories for the year.
c. The company worked 28,000 direct labor-hours during the year at a direct labor cost of $10.70 per hour.
d. Overhead is applied to products on the basis of standard direct labor-hours. Data relating to manufacturing overhead costs follow: