Question

Problem 8-27A (Static) Computing standard cost and analyzing variances LO 8-5, 8-6 Spiro Company manufactures molded candles that are finished by hand. The company developed the following standards for a new line of drip candles. Amount of direct materials per candle 1.6 pounds Price of direct materials per pound $ 1.50 Quantity of labor per unit 1 hour Price of direct labor per hour $ 20 /hour Total budgeted fixed overhead $ 390,000 During Year 2, Spiro 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 $1.35 per pound. Direct labor costs were actually $18.75 per hour and 26,400 actual hours were worked to produce the drip candles. Overhead for the year actually amounted to $330,000. Overhead is applied to products using a predetermined overhead rate based on estimated units.

Answer 1

This question asks us to:

a. Determine the standard cost per candle for direct products, direct labor, and overhead.

b. Calculate the total standard cost of one drip candle.

c. Determine the direct materials, direct labor, and overhead actual costs per candle.

d. The total actual cost of each candle

Answer:

Step-by-step explanation:

a.

Cost Computation Standard cost per unit

Direct material
`\$1.50 * 1.6` 2.4

Direct Labor
`\$20 * 1` 20

Overhead
`(\$390,000)/(30000)` 13

b.

To find the total average standard cost for 1 drip candle

The total standard cost per dip candle = $(2.4+20+13)

=$35.40

c. The actual cost per candle for direct materials, direct labor, and overhead can be computed as:

Cost Computation Standard cost per unit

Direct material
`((40000)/(24000)* 1.35)` 2.25

Direct Labor
`(26400)/(24000) * 18.75` 20.63

Overhead
`(\$330,000)/(24000)` 13.75

d. The total actual cost per candle = $(2.25 + 20.63 + 13.75)

= $36.63