Question

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batco makes baseball bats. each bat requires 2.00 pounds of wood at $18 per pound and 0.25 direct labor hour at $20
per hour. overhead is assigned at the rate of $40 per direct labor hour.
qs 21 - 6 (algo) total cost variances lo p2
assume the actual cost to manufacture 150 bats is $8,100. compute the total cost variance and identify it as favorable or unfavorable
note: indicate the effect of the variance by selecting favorable, unfavorable, or no variance.

Explanation:

Step1: Calculate the budgeted standard cost

• Material cost: Each bat needs \(2\) pounds of wood at \(\$18\) per pound. For \(150\) bats, material cost \(=150\times2\times18=\$5400\)
• Labor cost: Each bat needs \(0.25\) direct - labor hours at \(\$20\) per hour. For \(150\) bats, labor cost \(=150\times0.25\times20=\$750\)
• Overhead cost: Overhead is assigned at \(\$40\) per direct - labor hour. Labor hours for \(150\) bats \(=150\times0.25 = 37.5\) hours. Overhead cost \(=37.5\times40=\$1500\)
• Budgeted standard cost \(=5400 + 750+1500=\$7650\)

Step2: Calculate the total cost variance

Total cost variance \(=\text{Actual cost}-\text{Budgeted standard cost}\)
Actual cost \(=\$8100\), Budgeted standard cost \(=\$7650\)
Total cost variance \(=8100 - 7650=\$450\)

Answer:

Item	Amount	Variance
Budgeted standard cost	\(\$7650\)
Total cost variance	\(\$450\)	Unfavorable