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Hayes Chemical Company produces a chemical used in dry cleaning. Its accounting system uses standard costs. Standards for each 0.5-gallon can of chemical and actual data for Hayes Chemical follow:

Standards and budgeted information:

Gallons of material per can of chemical

1.20

Hours of labor per can of chemical

1.50

Standard cost per gallon of material

$6.00

Standard cost per hour of labor

$9.00

Overhead application rate per can

$7.75

Expected production - cans of chemical

20,000

Expected fixed overhead per year

$55,000

Variable overhead rate per 0.5-gallon can

$5.00

Actual information for 2018:

Cans produced

23,000

Gallons of material purchased

35,000

Cost of material purchased

$250,000

Gallons of material used in production

30,000

Cost of direct labor incurred

$290,000

Average wage rate per hour

$8.25

Actual overhead cost

$220,000

Required

a. Determine the standard cost per unit.

Material

$1.20

6.00

=

$ 7.20

Labor

$1.50

$9.00

=

13.50

Variable overhead

5

5

5.00

Fixed overhead

$55,000

20,000

=

2.75

Total unit cost

$ 28.45

b. Calculate the material, labor, and overhead standards.

Material price variance

250000

=

Favorable or unfavorable?

Material quantity variance

=

Favorable or unfavorable?

Labor rate variance

=

Favorable or unfavorable?

Labor efficiency variance

=

Favorable or unfavorable?

Overhead controllable variance

=

Favorable or unfavorable?

Overhead volume variance

=

Favorable or unfavorable?

c. List a possible cause for each variance.

Unfavorable Material Price Variance:

Unfavorable Material Quantity Variance:

Favorable Labor Rate Variance:

Unfavorable Labor Efficiency Variance:

Unfavorable Controllable Overhead Variance:

Favorable Overhead Volume Variance:

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