PAST EXAM QUESTION #$2$:

Fun Unlimited Corp. produces a toy called the Challenge. Overhead is applied to products on the basis of

direct labour$-$hours. The company recently implemented a standard costing system to help control costs and

has established the following standards for the Challenge toys:

Direct materials: $6$ microns per toy at $$0\mathrm{.}50$ per micron

Direct labour: $1\mathrm{.}3$ hours per toy at $$15$ per hour

Variable manufacturing overhead: $1\mathrm{.}3$ hours per toy at $$4$ per hour

Fixed manufacturing overhead: $1\mathrm{.}3$ hours per toy at $$6$ per hour

During July, the company produced $3,000$ Challenge toys. The fixed overhead expense budget for July was

$$24,180,$ with $4,030$ direct labour$-$hours as the denominator level of activity. Production data for the month on

the toys follow:

Direct materials: $25,000$ microns were purchased at a cost of $$0\mathrm{.}48$ per micron; $5,000$ of these microns were

still in inventory at the end of the month.

Direct labour: $4,000$ direct labour$-$hours were worked, at a cost of $$64,000.$

Variable overhead: Actual cost in July was $$17,000.$

Fixed overhead: Actual cost in July was $$25,000.$

Required:

Compute the materials, labour, variable manufacturing overhead, and fixed manufacturing overhead

variances.

Calculate total overapplied or underapplied overhead for July.