# XO-20 is an oil-based product used to remove rust on bolts and nuts that are stuck

XO-20 is an oil-based product used to remove rust on bolts and nuts that are stuck. Its accounting system uses standard costs. The standards per 0. 5-liter can of solution call for 0. 75 liters of material and 4 hours of labor. (0. 75 liters of material are needed due to evaporation in the production process. ) The standard cost per liter of material is \$2. 5. The standard cost per hour for labor is \$13. 00. Overhead is applied at the rate of \$15. 375 per can. Expected production is 8,000 cans with fixed overhead per year of \$35,000 and variable overhead of \$11 per unit (a 0. 5-liter can). During 2015, 7,800 cans were produced, 13,000 liters of material were purchased at a cost of \$60,000, 10,100 liters of material were used in production. The cost of direct labor incurred in 2015 was \$376,250 based on an average actual wage rate of \$11 per hour. Actual overhead for 2015 was \$125,000. Require: a) Determine the standard cost per unit. Round to the nearest cent. b) Calculate material, labor and overhead variances. c) List a possible cause for each variance.