Part 1
STU Products uses standard costing. It allocates manufacturing overhead (both variable and fixed) to products on the basis of standard direct manufacturing labour-hours (DLH). STU Products develops its manufacturing overhead rate from the current annual budget. The manufacturing overhead budget for 2017 is based on budgeted output of 672,000 units, requiring 3,360,000 DLH. The company is able to schedule production uniformly throughout the year.
A total of 72,000 output units requiring 321,000 DLH was produced during May 2017. Manufacturing overhead (MOH) costs incurred for May amounted to $355,800. The actual costs, compared with the annual budget and 1/12 of the annual budget, are as follows:
Part 1 STU Products uses standard costing. It allocates manufacturing overhead (both variable and fixed) to products on the basis of standard direct manufacturing labour-hours (DLH). STU Products develops its manufacturing overhead rate from the current annual budget. The manufacturing overhead budget for 2017 is based on budgeted output of 672,000 units, requiring 3,360,000 DLH. The company is able to schedule production uniformly throughout the year. A total of 72,000 output units requiring 321,000 DLH was produced during May 2017. Manufacturing overhead (MOH) costs incurred for May amounted to $355,800. The actual costs, compared with the annual budget and 1/12 of the annual budget, are as follows: Annual Manufacturing Overhead Budget 2017 Total Per Output Per DLH Monthly Actual Amount Unit Input Unit MOH MOH Budget Costs for May 2017 May 2017 Variable MOH Indirect mfg labour $1,008,000 $1.50 $0.30 $84,000 $84,000 Supplies 672,000 1.00 0.20 56,000 117,000 Fixed MOH Supervision 571,200 0.85 0.17 47,600 41,000 Utilities 369,600 0.55 0.11 30,800 55,000 Depreciation 705.600 1.05 0.21 58.800 58.800compared with the annual budget and 1/12 of the annual budget, are as follows: Annual Manufacturing Overhead Budget 2017 Total Per Output Per DLH Monthly Actual Amount Unit Input Unit MOH MOH Budget Costs for May 2017 May 2017 Variable MOH Indirect mfg labour $1,008,000 $1.50 $0.30 $84,000 $84,000 Supplies 672,000 1.00 0.20 56,000 117,000 Fixed MOH Supervision 571,200 0.85 0. 17 47,600 41,000 Utilities 369,600 0.55 0. 11 30,800 55,000 Depreciation 705.600 1.05 0.21 58.800 58.800 Total $3,326,400 $4.95 $0.99 $277,200 $355,800 Calculate the following amounts for STU Products for May 2017: 1. Total manufacturing overhead costs allocated 2. Variable manufacturing overhead spending variance 3. Fixed manufacturing overhead spending variance 4. Variable manufacturing overhead efficiency variance 5. Production-volume variance Be sure to identify each variance as favourable (F) or unfavourable (U).Part 2 ABC Manufacturing Company's costing system has two direct cost categories: direct materials and direct manufacturing labour. Manufacturing overhead (both variable and fixed) is allocated to products on the basis of standard DMLH. At the beginning of 2018, ABC adopted the following standards for its manufacturing costs: Input Cost per Output Unit Direct materials 3 kg at $5 per kg $ 15 Direct manufacturing labour 5 hours at $15 per hour 75 Manufacturing overhead: Variable $6 per DMLH 30 Fixed $8 per DMLH 40 Standard manufacturing cost per output unit $160 The denominator level for total manufacturing overhead per month in 2018 is 40,000 DMLH. ABC's flexible budget for January 2018 was based on this denominator level. The records for January indicate the following: Direct materials purchased 25,000 kg at $5.20/kg Direct materials used 23,100 kg Direct manufacturing labour 40,100 hours at $14.60/hour Total actual manufacturing overhead $600,000 (variable and fixed)The denominator level for total manufacturing overhead per month in 2018 is 40,000 DMLH. ABC's flexible budget for January 2018 was based on this denominator level. The records for January indicate the following: Direct materials purchased 25,000 kg at $5.20/kg Direct materials used 23,100 kg Direct manufacturing labour 40,100 hours at $14.60/hour Total actual manufacturing overhead $600,000 (variable and fixed) Actual production 7,800 output units 1. Prepare a schedule of total standard manufacturing costs for the 7,800 output units in January 2018 2. For January 2018, calculate the following variances, indicating whether each is favourable (F) or unfavourable (U): a. Direct materials rate variance, based on purchases. b. Direct materials efficiency variance. c. Direct manufacturing labour rate variance. d. Direct manufacturing labour efficiency variance. e. Total manufacturing overhead rate variance. f. VMOH efficiency variance. g. Production-volume variance
