Case Assignment #3
Latiefa is the cost accountant at Hallet and Sons, manufacturer of exquisite glass serving bowls.
The materials used for the bowls are inexpensive, but the process is labour intensive. The
supervisor decided to use less costly labour this period to see whether costs could be reduced.
Latiefa needs to prepare a report for her supervisor about how effective operations had been
during the month of January. She had set the following standards:
| | | Cost per Unit |
|------------------|-------------------------------|---------------|
| Direct materials | 3 kg @ $2.50 per kg | $7.50 |
| Direct labour | 5 hours @ $15.00 per hour | 75.00 |
| Factory overhead: | | |
| Variable | $3.00 per direct labour hour | 15.00 |
| Fixed | $20.00 per unit | 20.00 |
Variable overhead is allocated by labour hours, and fixed overhead is allocated by unit.
Estimated production per month is 40,000 standard direct labour hours.
Records for January based on production of 7,800 units indicated the following:
| | |
|-------------------------|----------------------|
| Direct materials purchased | 25,000 kg @ $2.60 |
| Direct materials used | 23,100 kg |
| Direct labour | 40,100 hours @ $14.60 |
| Variable overhead | $119,000 |
| Fixed overhead | $180,000 |
