Question

BatCo makes metal baseball bats. Each bat requires 1.00 kg of aluminum at $20 per kg and 0.20 direct labor hours at $26 per hour. Overhead is assigned at the rate of $40 per direct labor hour. QS 21-6 Cost variances LO C2 Assume the actual cost to manufacture one metal bat is $39.20. Compute the cost variance and classify it as favorable or unfavorable.

Answer 1

$6 unfavorable

Step-by-step explanation:

The computation of the cost variance is shown below:

Cost variance = Standard cost - actual cost

where

Standard cost is

= $20 + 0.20 ×$26 + $40 × 0.20

= $20 + $5.2 + $8

= $33.2

And, the actual cost is $39.20

So the cost variance is

= $33.2 - $39.20

= $6 unfavorable

Since the actual cost is more than the actual cost which reflects the unfavorable variance