Working Backward from Variances On May 1, 20XX, Bovar Company began the manufacture of a...
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Accounting
Working Backward from Variances
On May 1, 20XX, Bovar Company began the manufacture of a new mechanical device known as "Dandy." The company installed a standard cost system in accounting for manufacturing costs. The standard costs for a unit of "Dandy" are as follows:
Raw materials (6lbs. @ $1 per lb.)
$6.00
Direct Labor (1 hour @ $4 per hour)
$4.00
Overhead (75% of direct labor costs)
$3.00
Total
$13.00
The following data were obtained from Bovar's records for the month of May:
Units
Actual production of "Dandy"
4,000
Units sold of "Dandy"
2,500
Debit
Credit
Sales
$50,000
Purchases (26,000 pounds)
$27,300
Material price variance
1,300
Material quantity variance
1,000
Direct Labor rate variance
760
Direct labor usage variance
800
The amount shown above for material price variance is applicable to raw material purchased during May.
Compute each of the following items for Bovar for the month of May. Show computations in good form.
(a) Standard quantity of raw materials allowed (in pounds)
(b) Actual quantity of raw materials used (in pounds)
(c) Standard hours allowed.
(d) Actual hours worked.
(e) Actual direct labor rate.
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