# Acc505 Managerial Accounting: P11A-9 Kim Clark, president of Martell Company

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Acc505 Managerial Accounting
Problem 11A-9 Comprehensive Standard Cost Variances
“Wonderful! Not only did our salespeople do a good job in meeting the sales budget this year, but our production people did a good job in controlling costs as well,” said Kim Clark, president of Martell Company. “Our \$18,300 overall manufacturing cost variance is only 1.2% of the \$1,536,000 standard cost of products made during the year. That's well within the 3% parameter set by management for acceptable variances. It looks like everyone will be in line for a bonus this year.”
The company produces and sells a single product. The standard cost card for the product follows:
Standard cost card-per unit of product
Direct materials, 2 feet at \$8.45 per foot 16.90
Direct labor, 1.4 direct labor hours at \$16 per direct labor-hour 22.40
Variable overhead, 1.4 direct-labor hours at \$2.50 per direct labor-hour 3.50
Fixed overhead, 1.4 direct labor-hours at \$6 per direct labor hour 8.40
Standard cost per unit 51.20

The following additional information is available for the year just completed:
1. The company manufactured 30,000 units of product during the year.
2. A total of 64,000 feet of material was purchased during the year at a cost of \$8.55 per foot. All of this material was used to manufacture the 30,000 units. There were no beginning or ending inventories for the year.
3. The company worked 43,500 direct labor-hours during the year at a direct labor cost of \$15.80 per hour.
4. Overhead is applied to products on the basis of standard direct labor-hours. Data relating to manufacturing overhead costs follow:
Denominator activity level (direct labor-hours) 35,000