Minnesota Machine Tool Company has an automated production process, and production activity is quantified in terms of machine hours. It uses a standard-costing system. The annual static budget for 20x6 called for 6,000 units to be produced, requiring 30,000 machine hours. The standard-overhead rate for the year was computed using this planned level of production. The 20x6 manufacturing cost report follows.

MINNESOTA MACHINE TOOL COMPANY Manufacturing Cost Report For the Year 20x6

(in thousands of dollars)

Static Budget Flexible Budget 30,000 31,000 32,000 Machine Machine Machine Actual Cost Item Hours Hours Hours Cost Direct material:

“USI MUTA RING Ina ichso Sercesheenee: ecbeneeriie eeec eeneee nee $ 252.0 $ 260.4 $ 268.8 $ 273.4 BGMESICC I OVAareccmmcmstecasaeesrashernee rnoeme . 78.0 80.6 83.2 80.0 Direct labor:

ANS SEMMOLS Ieee settee Metts rere eee PAN 273.0 282.1 291.2 287.0 HiIl ieee cceshcenem mm op perma ceione nee Pere chen cue er 234.0 241.8 249.6 250.0 Manufacturing overhead:

MAILS IAIN Ore wintte, cnetmneedeuaenraencnu nees 24.0 24.8 25.6 30.0 SUO PIC San eee ee tern en ee tee sc aateas 129.0 1eeKe 137.6 125.0

(SIU)S IEINIISIICIIN: cceesctLaoeH notea cdorciosaee aseaasb ceeee ae 80.0 82.0 84.0 78.0 IMSOCCHOM mecca tmontcascsmmraer nmeareer v ets) 144.0 147.0 150.0 150.0 NNSURAINC Oar erate tytaa es rac Bec ce eteee reteset 50.0 50.0 50.0 50.0 DS MLECAUOMamacnecs. acaaeseacmeaeirs en cem s 200.0 200.0 200.0 200.0 NOVA OSlereermerrccaeer naa estcae ntenei aeu re $1,464.0 $1,502.0 $1,540.0 $1,523.4 Minnesota Machine Tool Company develops flexible budgets for different levels of activity for use in evaluating performance. It produced a total of 6,200 units during 20x6, requiring 32,000 machine hours. The preceding manufacturing cost report compares the company’s actual cost for the year with the static budget and the flexible budget for two different activity levels.

Required Compute the following amounts. For variances, indicate favorable or unfavorable where appropriate.

Answers snould be rounded to two decimal places when necessary.

a. The standard number of machine hours allowed to produce one unit of product.

b. The actual cost of direct material used in one unit of product.

c. The cost of material that should be processed per machine hour.

d. The standard direct-labor cost for each unit produced.

e. The variable-overhead rate per machine hour in a flexible-budget formula. (Hint: Use the highlow method to estimate cost behavior. In the high-low method of cost estimation, the difference between the cost levels at the high and low activity levels is divided by the difference between the high and low activity levels. This quotient provides a simple estimate of the variable cost rate per unit of activity.)

f. | The standard fixed-overhead rate per machine hour used for product costing.

g. The variable-overhead spending variance. (Assume that management has determined that the actual fixed overhead cost in 20x6 amounted to $330,000.)

h. The variable-overhead efficiency variance.

i. The fixed-overhead budget variance.

j. The fixed-overhead volume variance. [Make the same assumption as in requirement (g).]

k. The total budgeted manufacturing cost (in thousands of dollars) for an output of 6,050 units. (Hint:

Use the flexible-budget formula.)