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Chan uses a standard costing in its manufacturing plant for car parts. The standard cost of a particular car part, based on a denominator level

  • Chan uses a standard costing in its manufacturing plant for car parts. The standard cost of a particular car part, based on a denominator level of 4000 output units per year, included 6 machine hours of variable manufacturing overhead at $8 per hour and 6 machine hours of fixed manufacturing overhead at $15 per hour. Actual output produced was 4400 units. Variable manufacturing overhead incurred was $245,000. Fixed manufacturing overhead incurred was $373,000.Actual machine hours were 28,400.
  • Required:
  • 1.Prepareananalysisofallvariablemanufacturingoverheadandfixedmanufacturingoverheadvariances,usinga4varianceanalysis.(4Marks)
  • 2.Describehowindividualfixedmanufacturingoverheaditemsarecontrolledfromdaytoday.(2Marks)
  • 3. Discuss possible causes of the fixed manufacturing overhead variance.
  • (4 Marks)

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