Question
Sedona Company set the following standard costs for one unit of its product for 2017. Direct material (20 Ibs. @ $2.50 per Ib.) $ 50.00
Sedona Company set the following standard costs for one unit of its product for 2017.
| Direct material (20 Ibs. @ $2.50 per Ib.) | $ | 50.00 | ||
| Direct labor (10 hrs. @ $22.00 per hr.) | 220.00 | |||
| Factory variable overhead (10 hrs. @ $4.00 per hr.) | 40.00 | |||
| Factory fixed overhead (10 hrs. @ $1.60 per hr.) | 16.00 | |||
| Standard cost | $ | 326.00 | ||
The $5.60 ($4.00 + $1.60) total overhead rate per direct labor hour is based on an expected operating level equal to 75% of the factory's capacity of 50,000 units per month. The following monthly flexible budget information is also available.
| Operating Levels (% of capacity) | ||||||||||||
| Flexible Budget | 70% | 75% | 80% | |||||||||
| Budgeted output (units) | 35,000 | 37,500 | 40,000 | |||||||||
| Budgeted labor (standard hours) | 350,000 | 375,000 | 400,000 | |||||||||
| Budgeted overhead (dollars) | ||||||||||||
| Variable overhead | $ | 1,400,000 | $ | 1,500,000 | $ | 1,600,000 | ||||||
| Fixed overhead | 600,000 | 600,000 | 600,000 | |||||||||
| Total overhead | $ | 2,000,000 | $ | 2,100,000 | $ | 2,200,000 | ||||||
During the current month, the company operated at 70% of capacity, employees worked 340,000 hours, and the following actual overhead costs were incurred.
| Variable overhead costs | $ | 1,375,000 | ||
| Fixed overhead costs | 628,600 | |||
| Total overhead costs | $ | 2,003,600 | ||
AH = Actual Hours SH = Standard Hours AVR = Actual Variable Rate SVR = Standard Variable Rate SFR = Standard Fixed Rate
AH = Actual Hours SH = Standard Hours AVR = Actual Variable Rate SVR = Standard Variable Rate SFR = Standard Fixed Rate
AH = Actual Hours SH = Standard Hours AVR = Actual Variable Rate SVR = Standard Variable Rate SFR = Standard Fixed Rate
| (1) Compute the predetermined overhead application rate per hour for variable overhead, fixed overhead, and total overhead at 75% of capacity. | ||||||
| Predetermined OH Rate | ||||||
| Variable overhead costs | $4.00 | per DL hr. | ||||
| Fixed overhead costs | 1.80 | per DL hr. | ||||
| Total overhead costs | ||||||
| (2) Compute the total variable and total fixed overhead variances and classify each as favorable or unfavorable. | ||||||
| --------At 70% of Operating Capacity-------- | ||||||
| Standard DL Hours | Overhead Costs Applied | Actual Results | Variance | Fav./Unf. | ||
| Variable overhead costs | ||||||
| Fixed overhead costs | ||||||
| Total overhead costs | ||||||
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My Favorite Auditor Gave Me This Book
Authors: Funny Planner Publishing
1st Edition
1676058060, 978-1676058069
