Question
11. Baird Company makes classic Polish sausage. The company uses a standard cost system to help control costs. Manufacturing overhead is applied to production on
11. Baird Company makes classic Polish sausage. The company uses a standard cost system to help control costs. Manufacturing overhead is applied to production on the basis of standard direct labor-hours. According to the companys planning budget, the following manufacturing overhead costs should be incurred at an activity level of 15,000 labor-hours (the denominator activity level):
Variable manufacturing overhead cost $ 30,000 Fixed manufacturing overhead cost 60,000 Total manufacturing overhead cost $ 90,000
During the most recent year, the following operating results were recorded:
Activity: Actual labor-hours worked 12,000 Standard labor-hours allowed for the actual output 12,300 Cost: Actual variable manufacturing overhead cost incurred $ 34,800 Actual fixed manufacturing overhead cost incurred $ 48,750
At the end of the year, the companys Manufacturing Overhead account contained the following data:
Manufacturing Overhead Debit Credit Actual 83,550 Applied 73,800 9,750
Management would like to determine the cause of the $9,750 underapplied overhead.
Required:
1. Compute the predetermined overhead rate. Break the rate down into variable and fixed cost elements.
2. Show how the $73,800 Applied figure in the Manufacturing Overhead account was computed.
3. Break down the $9,750 underapplied overhead into four components: (1) variable overhead rate variance, (2) variable overhead efficiency variance, (3) fixed overhead budget variance, and (4) fixed overhead volume variance.
11. Baird Company makes classic Polish sausage. The company uses a standard cost system to help control costs. Manufacturing overhead is applied to production on the basis of standard direct labor-hours. According to the companys planning budget, the following manufacturing overhead costs should be incurred at an activity level of 15,000 labor-hours (the denominator activity level):
Variable manufacturing overhead cost | $ 30,000 |
---|---|
Fixed manufacturing overhead cost | 60,000 |
Total manufacturing overhead cost | $ 90,000 |
During the most recent year, the following operating results were recorded:
Activity: | |
---|---|
Actual labor-hours worked | 12,000 |
Standard labor-hours allowed for the actual output | 12,300 |
Cost: | |
Actual variable manufacturing overhead cost incurred | $ 34,800 |
Actual fixed manufacturing overhead cost incurred | $ 48,750 |
At the end of the year, the companys Manufacturing Overhead account contained the following data:
Manufacturing Overhead | |||
---|---|---|---|
Debit | Credit | ||
Actual | 83,550 | Applied | 73,800 |
9,750 |
Management would like to determine the cause of the $9,750 underapplied overhead.
Required:
1. Compute the predetermined overhead rate. Break the rate down into variable and fixed cost elements.
2. Show how the $73,800 Applied figure in the Manufacturing Overhead account was computed.
3. Break down the $9,750 underapplied overhead into four components: (1) variable overhead rate variance, (2) variable overhead efficiency variance, (3) fixed overhead budget variance, and (4) fixed overhead volume variance.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started