# Question & Answer: Problem 8-27A Computing standard cost and analyzing variances Spiro Company manu…..

Problem 8-27A Computing standard cost and analyzing variances 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 Price of direct materials per pound Quantity of labor per unit Price of direct labor per hour Total budgeted fixed overhead 1.6 pounds \$1.50 1 hour \$20/hour \$390,000 CHECK FIGURES During 2017, 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 S330,000. Overhead is applied to products using a predetermined overhead rate based on estimated units e. Usage variance for direct materials: \$2,400 U f. Fixed cost volume variance: \$78,000U Required Page 385

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A./

STANDARD COST PER CANDLE

DIRECT MATERIAL = (24000 * 1.6 POUNDS * \$1.50) / 24000

= \$2.4

DIRECT LABOUR = (24000 * 1 HR * \$20) / 24000

\$20

= \$30

B./

TOTAL STANDARD COST PER CANDLE

= \$2.4 + \$20 + \$13

= \$35.40

C./

ACTUAL COST PER CANDLE

DIRECT MATERIAL = (40000 * \$1.35) / 24000

= \$2.25

DIRECT LABOUR = (26400 * \$18.75) / 24000

= \$20.63