Question
Requirements 1. Compute the variable manufacturing overhead variances. What do each of these variances tell management? 2. Compute the fixed manufacturing overhead variances. What do
Requirements
1. Compute the variable manufacturing overhead variances. What do each of these variances tell management?
2. Compute the fixed manufacturing overhead variances. What do each of these variances tell management?
Standard Price and Volume
Direct materials (resin). . . . . . . . . . . . . . . . . . . . . . . | 13 pounds per pot at a cost of $4.00 |
per pound | |
Direct labor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4.0 hours at a cost of $17.00 per hour |
Standard variable manufacturing |
|
overhead rate. . . . . . . . . . . . . . . . . . . . . . . . . | $7.00 per direct labor hour |
Budgeted fixed manufacturing overhead. . . . . . . . . | $50,000 |
Standard fixed MOH rate. . . . . . . . . . . . . . . . . . . | $10.00 per direct labor hour (DLH) |
Actual Results
Country Designs allocated fixed manufacturing overhead to production based standard direct labor hours. Last month, the company reported the following actual results for the production of 1,300 flower pots:
Direct materials. . . . . . . . . . . . . . . . . . . . . . . . | Purchased 18,510 pounds at a cost of |
$4.50 per pound; Used 17,810 pounds to | |
produce 1,300 pots | |
Direct labor. . . . . . . . . . . . . . . . . . . . . . . . . . . . | Worked 4.5 hours per flower pot (5,850 |
total DLH) at a cost of $16.00 per hour | |
Actual variable manufacturing overhead. . . . . | $7.20 per direct labor hour for total |
actual variable manufacturing overhead | |
of $42,120 | |
Actual fixed manufacturing overhead. . . . . . . | $49,500 |
Standard fixed manufacturing overhead | |
allocated based on actual production. . . . . . . | $52,000 |
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