Kamen Manufacturing Co. estimates the following labor and over- head costs for the period:
Variable overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 44,200
Fixed overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,050
Total estimated overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 94,250
Estimated direct labor cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $130,000
Standard direct labor rate per hour . . . . . . . . . . . . . . . . . . . . . . . . $10
Each unit will require 26 hours of labor
Estimated production for the period. . . . . . . . . . . . . . . . . . . . . . . . 500 units
Production statistics for the period:
Actual production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 510 units
Actual direct labor hours used . . . . . . . . . . . . . . . . . . . . . . . . . . 13,015 hours
Actual direct labor cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $133,400
Actual overhead costs:
Variable costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $45,009
Fixed costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,125
Required:
1. Use the four-variance method for overhead analysis. Calculate the variances for direct labor and overhead.
2. Prove that the overhead variances equal over- or underapplied factory overhead for the period