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Standards for one unit of product

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Pardoe, Inc., manufactures a single product in which variable manufacturing overhead is assigned on the basis of standard direct labor-hours. The company uses a standard cost system and has established the following standards for one unit of product:

Standard Quantity

Standard Price or Rate

Standard Cost

  Direct materials

2.5 pounds

$6.50 per pound

$16.25

  Direct labor

0.6 hours

$20 per hour

$12.0

  Variable manufacturing overhead

0.6 hours

$4.75 per hour

$2.85

During March, the following activity was recorded by the company:

  • The company produced 5,800 units during the month.
  • A total of 18,500 pounds of material were purchased at a cost of $51,800.
  • There was no beginning inventory of materials on hand to start the month; at the end of the month, 3,700 pounds of material remained in the warehouse.
  • During March, 3,680 direct labor-hours were worked at a rate of $20.50 per hour.
  • Variable manufacturing overhead costs during March totaled $10,688.

The direct materials purchases variance is computed when the materials are purchased.

The materials price variance for March is:
  • $68,450 U
  • $29,300 F
  • $29,300 U
  • $68,450 F

Reference no: EM13978737

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