Question

Gerald/Brooke, Ltd. manufactures shirts, which it sells to customers for embossing with various slogans and emblems. The standard cost card for the shirts is as follows.


The annual budgets were based on the production of 1,000,000 shirts, using 250,000 direct labor hours. Due to slight seasonal demands, the company plans to produce 80,000 shirts per month, January through August, and 90,000 shirts per month, September through December.

Required
a. Calculate total budgeted fixed overhead cost.
b. What is the monthly fixed overhead budget amount? Does it depend on the number of shirts that are produced each month?
c. What monthly fixed overhead volume variance does management expect between
January and August? Between September and December? At the end of the year? Why does this happen?
d. What overhead rates would eliminate the expected monthly fixed overhead volume variances and still result in no volume variance at year-end? What do you think of this alternative to one annual overheadrate?


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  • CreatedFebruary 21, 2014
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