Question
Flandro Company uses a standard cost system and sets its predetermined overhead rate on the basis of direct labor-hours. The following data are taken from
Flandro Company uses a standard cost system and sets its predetermined overhead rate on the basis of direct labor-hours. The following data are taken from the companys planning budget for the current year:
Denominator activity (direct labor-hours) | 11,000 | |
Variable manufacturing overhead cost | $ | 34,650 |
Fixed manufacturing overhead cost | $ | 77,550 |
The standard cost card for the companys only product is given below:
Inputs | (1) Standard Quantity or Hours | (2) Standard Price or Rate | Standard Cost (1) (2) | ||||
Direct materials | 4 yards | $ | 1.95 | per yard | $ | 7.80 | |
Direct labor | 2 hours | $ | 8.50 | per hour | 17.00 | ||
Manufacturing overhead | 2 hours | $ | 10.20 | per hour | 20.40 | ||
Total standard cost per unit | $ | 45.20 | |||||
During the year, the company produced 5,720 units of product and incurred the following actual results:
Materials purchased, 36,300 yards at $1.90 per yard | $ | 68,970 | |
Materials used in production (in yards) | 23,600 | ||
Direct labor cost incurred, 12,000 hours at $8.05 per hour | $ | 96,600 | |
Variable manufacturing overhead cost incurred | $ | 35,900 | |
Fixed manufacturing overhead cost incurred | $ | 75,000 | |
Required:
1. Create a new standard cost card that separates the variable manufacturing overhead per unit and the fixed manufacturing overhead per unit.
2. Compute the materials price and quantity variances. Also, compute the labor rate and efficiency variances.
3. Compute the variable overhead rate and efficiency variances. Also, compute the fixed overhead budget and volume variances.
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