Kieffer Company makes men’s suit alterations for a major clothing store chain. No direct materials are used in the alterations process and overhead costs are primarily variable and relate very closely to direct labor charges. The company owner has decided to compute variances on a conversion cost basis. Standards for 2010 are as follows:
Expected direct labor hours (DLHs; to be incurred
evenly throughout the year) .......... 60,000
Number of suits altered in October .......... 1,800
Standard DLHs per suit .............. 3
Actual DLHs worked in October 2010 ........ 5,490
Budgeted variable conversion cost per DLH ....... $18
Budgeted annual fixed conversion cost ....... $72,000
Actual variable conversion cost for October 2010 ...$103,100
Actual fixed conversion cost for October 2010 ..... $5,750
a. How many suits does Kieffer Company expect to alter during 2010?
b. What is the predetermined fixed OH rate for Kieffer Company?
c. How many standard direct labor hours were allowed for October 2010?
d. Calculate the four conversion cost variances assuming that variable and fixed costs are separated.
e. Calculate the three conversion cost variances assuming that fixed and variable costs are combined.