Question 8-27A Computing
standard cost and analyzing variances.
Company manufactures molded candles that are finished by hand. The company
developed the following standards for a new line of drip candles:
2010, Quilter planned to produce 30,000 drip candles. Production lagged behind
expectations, and it actually produced only 24,000 drip candles. At year-end, direct
materials purchased and used amounted to 40,000 pounds at a unit price of $.54
per pound. Direct labor costs were actually $7.50 per hour and 26,400 actual
hours were worked to produce the drip candles. Overhead for the year actually
amounted to $132,000. Overhead is applied to products using a predetermined
overhead rate based on estimated units.
all computations to two decimal places)
Compute the standard cost per candle for direct materials, direct labor, and
Determine the total standard cost for one drip candle.
Compute the actual cost per candle for direct materials, direct labor, and
Compute the total actual cost per candle.
Compute the price and usage variances for direct materials and direct labor.
Identify any variances that Quilter should investigate. Offer possible cause(s)
for the variances.
Compute the fixed cost spending and volume variance. Explain your findings?
Although the individual variances (prices, usage, and overhead) were large, the
standard cost per unit and the actual cost per unit differed by only a few
cents. Explain why?
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