Question

Flandro 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:
Denominator activity (direct labor-hours) . . . . . . . . 5,000
Variable manufacturing overhead cost . . . . . . . . $ 25,000
Fixed manufacturing overhead cost . . . . . . . . . . $ 59,000
The standard cost card for the company’s only product is given below:
Direct materials, 3 yards at $ 4.40 per yard . . . . . . . . . . . . . $ 13.20
Direct labor, 1 hour at $ 12 per hour . . . . . . . . . . . . . . . . . . . . 12.00
Manufacturing overhead, 140% of direct labor cost . . . . . . . . 16.80
Standard cost per unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 42.00
During the year, the company produced 6,000 units of product and incurred the following costs:
Materials purchased, 24,000 yards at $ 4.80 per yard . . . $ 115,200
Materials used in production (in yards) . . . . . . . . . . . . . . . . 18,500
Direct labor cost incurred, 5,800 hours at $ 13 per hour . . $ 75,400
Variable manufacturing overhead cost incurred . . . . . . . . . $ 29,580
Fixed manufacturing overhead cost incurred . . . . . . . . . . . $ 60,400

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.



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  • CreatedMay 20, 2014
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