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The Greco Company uses a flexible budget and standard costs to aid planning and control of its machining manufacturing operations. Its costing system for manufacturing
The Greco Company uses a flexible budget and standard costs to aid planning and control of its machining manufacturing operations. Its costing system for manufacturing has two direct-cost categories (direct materials and direct manufacturing laborboth variable) and two overhead-cost categories (variable manufacturing overhead and fixed manufacturing overhead, both allocated using direct manufacturing labor-hours). The following actual results are for August: *(Click the icon to view the results.) Some additional information about Greco Company's budget, standard costs and labor follows: 2(Click the icon to view additional information.) Read the requirements Requirement 1. Compute the listed amounts for August. Determine the formula, then complete the computation for each. (Abbreviations used: DM = Direct materials, mfg. = manufacturing, OH = Overhead.) a. Total pounds of direct materials purchased. Pounds of DM DM price variance (per pound) DM price variance (based on purchases) 184,800 purchased 168,000 $ $ 1.10 b. Total number of pounds of excess direct materials used. Pounds of excess Standard cost per pound of DM direct materials used DM efficiency variance 759,000 $ $ 11.50 66,000 c. Variable manufacturing overhead spending variance. (Label the variance as favorable (F) or unfavorable (U).) Variable mfg. OH flexible-budget variance $ 10,800 Variable mfg. OH efficiency variance 18,900 Variable mfg. OH spending variance $ 8,100 F d. Total number of actual direct manufacturing labor-hours used. Determine the formula, then complete the computation for each step below. Begin by computing the standard direct manufacturing labor rate. Standard direct mfg Budgeted direct mfg. labor cost Budgeted direct mfg labor-hour level labor rate $ 750,000 30,000 $ 25.00 Now compute the total number of actual direct manufacturing labor-hours used. Actual direct mfg. (1) Direct mfg. labor costs incurred (2) Actual direct mfg. labor rate labor-hours 624750 e. Total number of standard direct manufacturing labor-hours allowed for the units produced. Determine the formula, then complete the computation for each step below. Begin by computing the standard variable manufacturing overhead rate. Standard variable (3) (4) mfg. OH rate Next, compute the number of excess hours. Excess (5) (6) hours Now compute the total number of standard direct manufacturing labor-hours allowed for the units produced. Standard hrs allowed (7) (8) for units produced f. Production-volume variance. Determine the formula, then complete the computation for each step below. Begin by computing the budgeted fixed manufacturing overhead rate. Budgeted fixed mfg. OH rate (9) (10) Next, compute the fixed manufacturing overhead allocated. Fixed mfg OH (11) (12) = allocated = Now compute the production-volume variance. (Label the variance as favorable (F) or unfavorable (U).) Production-volume (13) (14) variance (15) Requirement 2. Describe how Greco's control of variable manufacturing overhead items differs from its control of fixed manufacturing overhead items. The control of variable manufacturing overhead requires (16) Individual variable manufacturing overhead items are (17) affected very much by day-to-day control. They are controlled (18) affected very much by day-to-day control. They are Individual fixed manufacturing overhead items are (19) controlled (20) 1: Data Table $184,800 F $759,000 U 624,750 Direct materials price variance (based on purchases) Direct materials efficiency variance Direct manufacturing labor costs incurred Variable manufacturing overhead flexible-budget variance Variable manufacturing overhead efficiency variance Fixed manufacturing overhead incurred 10,800 U 18,900 U 467,500 2: More Info At the 30,000 budgeted direct manufacturing labor-hour level for August, budgeted direct manufacturing labor is $750,000, budgeted variable manufacturing overhead is $360,000, and budgeted fixed manufacturing overhead is $510,000. The standard cost per pound of direct materials is $11.50. The standard allowance is 6 pounds of direct materials for each unit of product. During August, 40,000 units of product were produced. There was no beginning inventory of direct materials. There was no beginning or ending work in process. In August, the direct materials price variance was $1.10 per pound. In July, labor unrest caused a major slowdown in the pace of production, resulting in an unfavorable direct manufacturing labor efficiency variance of $267,500. There was no direct manufacturing labor price variance. Labor unrest persisted into August Some workers quit. Their replacements had to be hired at higher wage rates, which had to be extended to all workers. The actual average wage rate in August exceeded the standard average wage rate by $0.50 per hour. 3: Requirements 1. Compute the following for August: a. Total pounds of direct materials purchased b. Total number of pounds of excess direct materials used C. Variable manufacturing overhead spending variance d. Total number of actual direct manufacturing labor-hours used e. Total number of standard direct manufacturing labor-hours allowed for the units produced f. Production-volume variance 2. Describe how Greco's control of variable manufacturing overhead items differs from its control of fixed manufacturing overhead items. 4: listed amounts a. Total pounds of direct materials purchased b. Total number of unds of excess direct materials used c. Variable manufacturing overhead spending variance d. Total number of actual direct manufacturing labor-hours used e. Total number of standard direct manufacturing labor-hours allowed for the units produced f. Production-volume variance
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