Problem : Vinbit Manufactured by Starr Company
The Starr Company has established a standard cost system for the manufacture of a single consumer product, which is branded under the name Vinbit. The standard costs of producing one Vinbit are shown below:
Standard Cost Card:
Direct Materials: 20 pounds @ $.30 $6.00
Direct Labor: 3 hours @ $15.00 $45.00
At the beginning of the year, Starr Company established a monthly flexible overhead budget as follows:
Flexible Overhead Budget:
Variable Charges - $.60 per direct labor hour
Fixed Charges - $5,000.00 per month
Budgeted Volume – 10,000 direct labor hours
The costs of operations to produce 4,500 Vinbits during May are stated below (there were no initial inventories):
Actual Costs:
Materials purchased: 110,000 pounds @ $.31 $34,100
Materials used: 105,000 pounds
Direct Labor: 13,750 hours @ $15.20 $209,000
Variable overhead incurred $8,500
Fixed overhead incurred $6,000
Required:
Prepare a calculation of the direct material price and quantity variances for the month of May. All variances should be calculated as soon as possible.
Prepare a calculation of the direct labor wage rate and efficiency variances for the month of May.