Mover Company has developed the following standards for one of its products: The following activity occurred during March:
The company records materials price variances at the time of purchase. The variable standard cost per unit for materials and labor is
A) $98.
B) $84.
C) $74.
D) $38.

Question

Mover Company has developed the following standards for one of its products:  The following activity occurred during March:
 The company records materials price variances at the time of purchase. The variable standard cost per unit for materials and labor is
A) $98. 
B) $84. 
C) $74. 
D) $38.

Quizplus · Accepted Answer

We can begin by calculating the total actual cost per unit using the information provided:

Direct materials:
Actual quantity purchased = 6,800 lbs
Actual cost per lb = $12.80
Total actual cost of materials = 6,800 lbs x $12.80/lb = $87,040
Actual materials cost per unit = $87,040 / 8,500 units = $10.24

Direct labor:
Actual hours worked = 11,700 hours
Actual cost per hour = $16.50
Total actual cost of labor = 11,700 hours x $16.50/hour = $193,050
Actual labor cost per unit = $193,050 / 8,500 units = $22.71

Therefore, the total actual cost per unit is:
$10.24 (direct materials) + $22.71 (direct labor) = $32.95

To find the variable standard cost per unit, we add the standard cost per unit for direct materials and direct labor:

Standard direct materials cost per unit = 5,000 lbs x $11/lb = $55
Standard direct labor cost per unit = 1,500 hours x $42/hour = $63
Variable standard cost per unit = $55 + $63 = $118

Finally, we can calculate the materials price variance as:
Actual quantity purchased x (Actual price - Standard price) = 6,800 lbs x ($12.80/lb - $11/lb) = $10,240 unfavorable

Using the formula for total overhead variance, we can find the variable overhead rate per unit:

Variable overhead spending variance = Actual variable overhead - (Actual hours x Variable overhead rate)
$34,680 - (11,700 hours x Variable overhead rate) = $11,160 unfavorable
Variable overhead rate = $2.97 unfavorable per hour

Therefore, the variable standard cost per unit for materials and labor is:
$118 (standard direct materials and labor cost per unit) - $10.24 (actual direct materials cost per unit) - $22.71 (actual direct labor cost per unit) - $2.97 (variable overhead rate per unit) = $82.08

However, none of the answer choices match this calculation exactly. The closest answer choice is B) $84, which is only off by $1.92. Therefore, we choose B as the best option.

Mover Company Has Developed the Following Standards for One of Its