Company uses a standard cost system and sets predetermined overhead rates on the basis of direct labor-hours. The following data are taken from the company’s budget for the current year:

The standard cost card for the company’s only product is given below:

                        

During the year, the company produced 6,000 units of product and incurred the following costs:

Required:

1.         Redo the standard cost card in a clearer, more usable format by detailing the variable and fixed overhead cost elements.

2.         Prepare an analysis of the variances for direct materials and direct labor for the year.

3.          Prepare an analysis of the variances for variable and fixed overhead for the year.

4.         What effect, if any, does the choice of a denominator activity level have on unit standard costs? Is the volume variance a controllable variance from a spending point of view? Explain.

Transcribed Image Text:

Denominator activity (direct labor-hours) Variable manufacturing overhead cost Fixed manufacturing overhead cost 5,000 $25,000 S59,000