Question
Gumbe Company has developed the following standard overhead costs based on a denominator level of activity of 810,000 direct labour-hours (DLHs): Variable overhead costs 3
Gumbe Company has developed the following standard overhead costs based on a denominator level of activity of 810,000 direct labour-hours (DLHs): Variable overhead costs 3 DLHs at $3 $ 9 Fixed overhead costs 3 DLHs at $4 $12 During June, 230,000 units were produced. The following information relates to June's production: The production staff worked 644,000 DLHs. Actual overhead cost incurred totalled $4,838,200 ($1,802,200 variable and $3,035,000 fixed) Required: a) Calculate the expected output in units based on the denominator level of activity. (1 mark) Level of activity 810000 DLH 6 Expected output in units 135000 b) Calculate the standard hours allowed for actual production. (2 marks) units produced 230000 Hours 6 Expected output in units 1380000 c) What is the flexible budget fixed overhead? (2 marks) $ Expected output in units $ d) Calculate the variable overhead variances and indicate if they are favourable (F) or unfavourable (U). (4 marks) Please enter unfavourable and favourable variances as positive numbers. VOH rate variance $ 129800 F VOH efficency variance $ U e) Calculate the fixed overhead variances. (4 marks) Please enter unfavourable and favourable variances as positive numbers. FOH budget variance $ F FOH volume variance $ U f) How much was the fixed overhead over- or under-applied for June. (1 mark) Please enter unfavourable and favourable variances as positive numbers. Over- or under-applied fixed overhead $ F g) Calculate the predetermined overhead rate if the denominator level of activity was 900,000 DLHs. Assume this activity level is within the relevant range. (1 mark) New predetermined overhead rate $
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