Question
Clarke Products uses standard costing. It allocates manufacturing overhead (both variable and fixed) to products on the basis of standard direct manufacturing labor-hours (DLH). Products
Clarke Products uses standard costing. It allocates manufacturing overhead (both variable and fixed) to products on the basis of standard direct manufacturing labor-hours (DLH).
Products develops its manufacturing overhead rate from the current annual budget. The manufacturing overhead budget for 2017 is based on budgeted output of 696,000 units, requiring 3,480,000 DLH. The company is able to schedule production uniformly thorughout the year. A total of 69,000 output units requiring 323,000 DLH was produced during May 2017. Manufacturing overhead (MOH) costs incurred for May amounted to $377,400.
Annual Manufacturing Overhead Budget 2017
Per
Per DLH
Monthly
Actual MOH
Total
Output
Input
MOH Budget
Costs for
Amount
Unit
Unit
May 2017
May 2017
Variable MOH
Indirect manufacturing labor
$1,044,000
$1.50
$0.30
$87,000
$87,000
Supplies
696,000
1.00
0.20
58,000
115,000
Fixed MOH
Supervision
556,800
0.80
0.16
46,400
42,000
Utilities
348,000
0.50
0.10
29,000
58,000
Depreciation
904,800
1.30
0.26
75,400
75,400
Total
$3,549,600
$5.10
$1.02
$295,800
$377,400
1. Calculate total manufacturing overhead costs allocated.
Begin by computing the budgeted hours per unit. Determine the formula, then compute the amount.
| Actual DLH | / | Budgeted units | = | Budgeted hours per unit |
|
| / |
| = |
|
Now calculate the total manufacturing overhead (MOH) costs allocated. Determine the formula, then complete the calculation.
| Actual units | x | Budgeted units | x |
| = | Total MOH costs allocated | ||
|
| x |
| x |
| = |
|
For items 2 through 5, complete the following tables before calculating the remaining amounts in the requirement. Complete the table for variable MOH.
|
|
| Actual input |
|
|
|
| Actual costs | x | Flexible | Allocated |
|
| incurred | budgeted rate | budget | overhead |
| Variable MOH |
|
|
|
Next complete the table for fixed MOH.
|
|
| Same budgeted |
|
|
| lump sum | ||||
|
| Actual costs | regardless of | Flexible | Allocated |
|
| incurred | output level | budget | overhead |
| Fixed MOH |
|
|
|
|
Be sure to identify each variance as favorable (F) or unfavorable (U).
| 2. | The variable manufacturing overhead spending variance is |
|
|
| 3. | The fixed manufacturing overhead spending variance is |
|
|
| 4. | The variable manufacturing overhead efficiency variance is |
|
|
| 5. | The production-volume variance is |
|
|
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Principles Of International Auditing And Assurance
Authors: Rick Hayes, Philip Wallage, Peter Eimers
4th Edition
9463720065, 978-9463720069
