Reference no: EM132837919

Question - Utease Corporation has several production plants nationwide. A newly opened plant in Dubuque produces and sells one product. The plant is treated, for responsibility accounting purposes, as a profit center. The unit standard costs for a production unit, with overhead applied based on direct labor hours, are as follows.

Manufacturing costs (per unit based on expected activity of 18,000 units or 36,000 direct labor hours):

Direct materials (2.5 pounds at $10) $25.00

Direct labor (2.0 hours at $40) 80.00

Variable overhead (2.0 hours at $25) 50.00

Fixed overhead (2.0 hours at $35) 70.00

Standard cost per unit $225.00

Budgeted selling and administrative costs:

Variable$4 per unitFixed$1,500,000

Expected sales activity: 14,000 units at $380 per unit

Desired ending inventories: 12% of sales

Assume this is the first year of operations for the Dubuque plant. During the year, the company had the following activity.

Units produced 17,000

Units sold 15,500

Unit selling price $375

Direct labor hours worked 33,500

Direct labor costs $1,373,500

Direct materials purchased 46,500 pounds

Direct materials costs $465,000

Direct materials used 46,500 pounds

Actual fixed overhead $1,000,000

Actual variable overhead $800,000

Actual selling and administrative costs $1,756,000

Required -

1. Find the direct materials variances (materials price variance and quantity variance).

2. Where does the standard price come from? Is it the manufacturing costs per unit based on expected activity of 18,000 units or 36,000 director labor hours at 225.00 the standard cost per unit or Expected sales activity: 14,000 units at 380 unit? What am I doing wrong?