Applewood Manufacturing produces ceramic teapots. Applewood allocates overhead based on the number of direct labor hours. The company is looking into using a standard cost system and has developed the following standards (one "unit" is a batch of 100 teapots): (Click the icon to view the standards.) Actual cost and operating data from the most recent month are as follows: (Click the icon to view the actual results.) All manufacturing overhead is allocated on the basis of direct labor hours. Read the requirements. HR. Requirement 1. Calculate the standard cost of one batch. Standard cost Standard cost per batch Direct materials Direct labor Variable MOH Fixed MOH Total standard cost Requirement 2a. Calculate the direct material variances. (Enter the variances as positive numbers. Enter currency amounts to the nearest cent and your answers to the nearest whole dollar. Label the variances as favorable (F) or unfavorable (U). Abbreviations used: DM = Direct materials.) First, determine the formula for the price variance, then compute the price variance for direct materials x DM price variance Determine the formula for the quantity variance, then compute the quantity variance for direct materials. DM quantity variance wala lavic Standard Actual Standards: Purchased 2,800 pounds at a cost of $3.60 per pound Direct material 30 pounds per batch at $4.00 per pound Direct labor 4.0 hours per batch at $10.00 per hour Variable MOH standard rate $2.00 per direct labor hour Used 2,600 pounds in producing 70 batches Actual direct labor cost of $2,907 at an average direct labor cost per hour of $10.20 Actual variable MOH $599 Actual fixed MOH $2,300 Predetermined fixed MOH standard rate $5.00 per direct labor hour Total budgeted fixed MOH cost $2,000 Requirement 2b. Calculate the direct labor variances. (Enter the variances as positive numbers. Enter currency amounts to the nearest cent and your answers to the nearest whole dollar. Label the variances as favorable (F) or unfavorable (U). Abbreviations used: DL = Direct labor.) First, determine the formula for the rate variance, then compute the rate variance for direct labor. DL rate variance First, determine the formula for the efficiency variance, then compute the efficiency variance for direct labor. = DL efficiency variance Requirement 2c. Calculate the variable manufacturing overhead variances. (Enter the variances as positive numbers. Enter currency amounts to the nearest cent and your answers to the nearest whole dollar. Label the variances as favorable (F) or unfavorable (U).) First, determine the formula for the rate variance, then compute the rate variance for variable manufacturing overhead. Variable overhead x( rate variance Now compute the variable manufacturing overhead efficiency variance. First determine the formula for the efficiency variance, then compute the efficiency variance for variable manufacturing overhead. Variable overhead efficiency variance x - Requirement 2d. Calculate the fixed manufacturing overhead variances. (Enter the variances as positive numbers. Label the variances as favorable (F) or unfavorable (U). Abbreviations used: MOH = Manufacturing overhead) Begin by computing the fixed manufacturing overhead budget variance. First determine the formula for the budget variance, then compute the budget variance for fixed manufacturing overhead. Fixed MOH = budget variance = Now compute the fixed manufacturing overhead volume variance. First determine the formula for the volume variance, then compute the volume variance for fixed manufacturing overhead. Fixed MOH volume variance Requirement 3. Have the company's managers done a good job or a poor job controlling materials, labor and overhead costs? Why or why not? Overall, the managers have done a V job of controlling materials, labor, and overhead costs. This is evidenced by the fact that they have Requirement 4. Describe how the company's managers can benefit from the standard costing system. (If an input field is not used in the table, leave the input field empty, do not select a label.) The following are benefits of a standard costing system: Do you think the company should continue with the standard cost system? The company | Lean thinking focuses on looking at the past data and standards. triance, then compute the volume variance for fixed manufacturing overhead Standard costing systems simplify bookkeeping. Fixed MOH volume variance Standards are often used as the basis for many components in the master budget. | Standard costs never become outdated or inaccurate. overhead costs? Why or why not? nced by the fact that they have Standards create a benchmark by which to judge actual costs. put field is not used in the table, leave the input field empty, do not select a label.) The use of practical, or attainable, standards should increase employee motivation. Do you think the company should continue with the standard cost system? The company
