Transcribed Image Text: Michael Roberts is a cost accountant and business analyst for HP Clothing Company (HPCC), which manufactures expensive T-shirts. HPCC uses two direct

Transcribed Image Text: Michael Roberts is a cost accountant and business analyst for HP Clothing Company (HPCC),
which manufactures expensive T-shirts. HPCC uses two direct cost categories: direct materials
and direct manufacturing labor. It allocates manufacturing overhead to production based upon
labor hours used.
At the beginning of 2020, HPCC adopted the following standards for each T-shirt:
Standard Quantity Standard Price
Or Hour
3.1 kg
Or Rate
$9 /kg
Input
Direct materials
Direct labor
2 hours
$8/hour
Variable overhead
2 hours
$5 /hour
Actual results for April 2020 were as follows:
Production
3,200 T-shirts
Direct materials purchased
Direct materials used
12,900 kg. at $10 kg
9,000 kg
7,200 hours for $59,000
Direct labor
Variable manufacturing overhead $ 35,600
Required:
a) Compute the standard variable product cost per unit.
b) For the month of April 2020, compute the following variances, indicating whether each is
favorable or unfavorable:
i. Direct materials price variance, based on purchases
ii. Direct materials quantity variance
Direct labor rate variance
iii.
iv. Direct labor efficiency variance
v. Variable manufacturing overhead rate variance
vi. Variable manufacturing overhead efficiency variance
c) Explain the possible reasons of any two unfavorable variances for direct costs and suggest
the way to rectify them.

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