The Rio Company manufactures beach umbrellas and uses a standard cost system. An analysis of costs shows the direct material used in one umbrella costs $10.20. One hour of direct labor costs $12 with standard production being two umbrellas per hour. Variable manufacturing overhead is estimated at $4.50 per hour, and fixed overhead is set as $72,000 per year. Normal operating capacity is 120,000 umbrellas per year.
1.Determine the standard variable cost per umbrella based on the above information.
- During the year 110,000 umbrellas were produced at the following costs:
- Materials (114,000 units @ $10.50) $ 1,197,000
- Labor (62,000 hours @ $11.80) 731,600
- Variable overhead 285,200
- Fixed overhead 72,000 (don't need for these calcs)
2.Calculate the direct materials cost variances, the direct labor cost variances, and the variable overhead cost variances.