Question: Dixon Manufacturing Company which makes aluminum alloy wheels for automobiles

Dixon Manufacturing Company, which makes aluminum alloy wheels for automobiles, recently introduced a new luxury wheel that fits small sports cars. The company developed the following standards for its new product.
Amount of direct materials per wheel ......... 2 pounds
Price of direct materials per pound .......... $7.50
Quantity of labor per wheel ............ 2.5 hours
Price of direct labor per hour ........... $16.00/hour
Total budgeted fixed overhead .......... $168,000
In its first year of operation, Dixon planned to produce 3,000 sets of wheels (four wheels per set). Because of unexpected demand, it actually produced 3,600 sets of wheels. By year-end, direct materials purchased and used amounted to 30,000 pounds of aluminum at a cost of $234,000. Direct labor costs were actually $16.80 per hour. Actual hours worked were 2.2 hours per wheel. Overhead for the year actually amounted to $180,000. Overhead is applied to products using a predetermined overhead rate based on the total estimated number of wheels to be produced.

Round all computations to two decimal places.
a. Compute the standard cost per wheel for direct materials, direct labor, and overhead.
b. Determine the total standard cost per wheel.
c. Compute the actual cost per wheel for direct materials, direct labor, and overhead.
d. Compute the actual cost per wheel.
e. Compute the price and usage variances for direct materials and direct labor. Identify any variances that Dixon should investigate. Based on your results, offer a possible explanation for the labor usage variance.
f. Compute the fixed manufacturing overhead cost spending and volume variances. Explain your findings.

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  • CreatedFebruary 07, 2014
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