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Chapter 11: Standard Costs and Balanced Scorecard
E11-3
Stefani Company has gathered the following information about its
product. Direct materials. Each unit of product contains 4.5 pounds of
materials. The average waste and spoilage per unit produced under
normal conditions is 0.5 pounds. Materials cost $5 per pound, but
Stefani always takes the 2% cash discount all of its suppliers offer.
Freight costs average $0.25 per pound. Direct labor. Each unit requires 2
hours of labor. Setup, cleanup, and downtime average 0.4 hours per unit.
The average hourly pay rate of Stefani's employees is $12. Payroll taxes
and fringe benefits are an additional $3 per hour. Manufacturing
overhead. Overhead is applied at a rate of $7 per direct labor hour.
Instructions
a. Compute Stefani's total standard cost per unit.
E11-6
Lewis Company's standard labor cost of producing one unit of Product
DD is 4 hours at the rate of $12.00 per hour. During August, 40,600
hours of labor are incurred at a cost of $12.15 per hour to produce
10,000 units of Product DD.
Instructions
a. Compute the total labor variance.
b. Compute the labor price and quantity variances.