Question
Munoz Manufacturing Co. normally produces 10,000 units of product X each month. Each unit requires 2 hours of direct labor, and factory overhead is applied
Munoz Manufacturing Co. normally produces 10,000 units of product X each month. Each unit requires 2 hours of direct labor, and factory overhead is applied on a direct labor hour basis. Fixed costs and variable costs in factory overhead at the normal capacity are $2.50 and $1.50 per direct labor hour, respectively. Cost and production data for May follow:
Production for the month. . . . . . . . .9,000 units
Direct labor hours used. . . . . . . . . 18,500 hours
Factory Overhead incurred for:
Variable costs. . . .. . . . . . . . . . . . . . $28,500
Fixed costs. . . . . . . . . . . . . . . . . . . . . $52,000
- Calculate the flexible-budget variance.
- Calculate the production-volume variance.
- Was the total factory overhead under- or overapplied? By what amount?
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