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S Arzu Inc. produces premium protective car covers. The direct materials and direct labour standards for one car cover are as follows: Direct materials
S Arzu Inc. produces premium protective car covers. The direct materials and direct labour standards for one car cover are as follows: Direct materials Standard Quantity or Hours 9.00 metres of cloth Direct labour Variable overhead 0.35 hours 0.35 hours Standard Price or Rate $10 per metre $ 20 per hour $ 8 per hour Standard Cost $90.00 $ 7.00 $ 2.80 Budgeted fixed overhead cost is $17,400, and the normal production volume is 2,885 car covers. Overhead is applied on the basis of direct labour-hours. In September, the following activity was recorded: . 24,300 metres of cloth were purchased at a cost of $10.50 per metre. All of the purchased material was used to produce 2,700 car covers. 585 direct labour-hours were recorded at a total labour cost of $11,700. Actual variable overhead cost was $5,600, and fixed overhead cost was $16,850.
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