STANDARD COSTS AND VARIANCES

Wakky Company produces widgets. In the table below, the company has begin the calculation of the standard

cost to make one widget. Using the standard manufacturing overhead data provided, complete the table

below to show the total manufacturing cost of one widget. The standards are to be computed based upon

normal annual production of

70,000

widgets for the year, with factory overhead applied based on direct

labor hours. At the beginning of the year, management made the following estimates related to overhead:

Standard FOH Costs:

For Normal Capacity - (estimated at the beginning of the year for a production level of

70,000

widgets):

Estimated annual variable overhead costs =

$808,500

Estimated annual fixed overhead costs =

$241,500

Total estimated annual overhead costs =

$1,050,000

Total estimated annual direct labor hours (DLH) at

100% of normal capacity (70,000 widgets) =

105,000

Total DLHs

Variable factory overhead rate per direct labor hour =

per DLH

Fixed factory overhead rate per direct labor hour =

per DLH

Predetermined factory overhead rate per DLH =

per DLH

1.

Complete the Standard Cost Report:

Wakky Company

Standard Cost Report

Product manufactured =

Widgets

Unit of Product = One Widget

Manufacturing Cost Elements

Standard Quantity

Standard Price

Standard Cost

Direct materials

3

pounds

$5.00

per pound

Direct labor

1.5

DLHs

$12.00

per DLH

Factory overhead applied:

Variable FOH

1.5

DLHs

per DLH

Fixed FOH

1.5

DLHs

per DLH

Calculated standard cost to manufacture 1 widget

2.

Calculate the standard costs allowed for the actual output level of widgets:

Standard cost

@

75,000

widgets

Total

Direct materials cost

$

per lb.

total lbs allowed

Direct labor cost

$

per DLH

total DLH allowed

Factory overhead applied

$

PFOH Rate

total DLH allowed

Standard cost allowed for actual output level

Actual Production

The actual cost and amounts of input to make the actual output of

75,000

widgets for the year

ended December 31, 2013 was:

Total

Direct materials:

230,000

lbs @

$4.50

per pound

Direct labor:

111,000

DLH @

$13.25

per DLH

Factory Overhead (FOH):

Total variable FOH costs

$850,000

Total fixed FOH costs

$241,500

Total actual FOH costs for 2013

Actual cost for actual output level

3.

Calculate the total manufacturing cost variance