The Ramirez Company uses standard costing in its manufacturing plant for auto parts. The standard cost of
Question:
The Ramirez Company uses standard costing in its manufacturing plant for auto parts. The standard cost of a particular auto part, based on a denominator level of 4,000 output units per year, included 5 machine-hours of variable manufacturing overhead at $7 per hour and 5 machine-hours of fixed manufacturing overhead at $14 per hour. Actual output produced was 4,200 units. Variable manufacturing overhead incurred was $170,000. Fixed manufacturing overhead incurred was $303,000. Actual machine-hours were 22,000.
Required
1. Prepare an analysis of all variable manufacturing overhead and fixed manufacturing overhead variances, using the 4-variance analysis in Exhibit 8-4.
2. Prepare journal entries using the 4-variance analysis.
3. Describe how individual fixed manufacturing overhead items are controlled from day to day.
4. Discuss possible causes of the fixed manufacturing overhead variances.
Step by Step Answer:
Horngrens Cost Accounting A Managerial Emphasis
ISBN: 9780135628478
17th Edition
Authors: Srikant M. Datar, Madhav V. Rajan