Question
Milton Company uses a standard cost system in which manufacturing overhead costs are applied to units of product (widgets) on the basis of direct labor
Milton Company uses a standard cost system in which manufacturing overhead costs are applied to units of
product (widgets) on the basis of direct labor hours. Standards call for 2 direct labor hours per widget. The
standard labor rate is $10 per hour. Four pounds of material are needed for each widget at a standard cost of
$2.25 per pound. The standard variable overhead rate is $3.50 per direct labor hour.
Milton actually produces 17,000 widgets during the year.
Direct labor costs are $359,100 for 34,200 hours.
Milton purchases 70,000 pounds of materials at $2.50 per pound, and used 65,400 pounds of those
materials (the rest are in inventory at the end of the year)
Actual variable overhead costs $92,000.
For variable overhead, compute the spending(price) variance and label it is favorable (F) or unfavorable (U). (Hint--
do not recompute total variable overhead cost with a rounded rate per hour. Use the total actual cost as given.)
Type your answer in the answer box using the following format rules.
Your answer should not have any punctuation (no commas, periods, dollar signs, etc). The U or F should follow the
numeric value with no spaces.
Formatting examples:
A $200 favorable variance is: 200F
A $1,295 unfavorable variance is : 1295U
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started