Liberty Inc. manufactures parts for commercial exercise equipment and has always applied overhead to production using direct
Question:
Liberty Inc. manufactures parts for commercial exercise equipment and has always applied overhead to production using direct labor hours. Recently, company facilities were upgraded resulting in significantly more automation. As a result, the accounting system was revised to show only two cost categories: direct material and conversion. Estimated variable and fixed conversion costs for the current month were \(\$ 102,000\) and \(\$ 45,600\), respectively. Expected output for the current month was 3,000 units, and the estimated number of machine hours was 6,000 . During July, the firm actually used 5,400 machine hours to make 2,880 units while incurring \(\$ 134,000\) of conversion costs. Of this amount, \(\$ 44,000\) was fixed cost.
Using the four-variance approach, compute the variances for conversion costs.
Step by Step Answer:
Cost Accounting Foundations And Evolutions
ISBN: 9781618533531
10th Edition
Authors: Amie Dragoo, Michael Kinney, Cecily Raiborn