The Mendoza Company is installing an absorption standard costing system and a flexible overhead budget. Standard costs have recently been developed for its only product and are as follows: 

Expected production activity is expressed as 7,500 standard directlabour-hours per month. Fixed overhead is expected to be $60,000 per month. The predetermined fixed overhead rate for product costing is not changed from month to month. 

1. Calculate the proper fixed overhead rate per standard direct-labourhour and per unit. 

2. Graph the following for activity from zero to 10,000 hours: 

1. Budgeted variable overhead 

2. Variable overhead applied to product 

3. Graph the following for activity from zero to 10,000 hours: 

1. Budgeted fixed overhead 

2. Fixed overhead applied to product 

4. Assume that 6,000 standard direct-labour-hours are allowed for the output achieved during a given month. Actual variable overhead of $30,600 was incurred: actual fixed overhead amounted to $62,000. Calculate the 

1. Fixed overhead budget variance 

2. Fixed overhead volume variance 

3. Variable overhead spending variance 

5. Assume that 7,800 standard direct-labour-hours are allowed for the output achieved during a given month. Actual overhead incurred amounted to $99,700, $62,200 of which was fixed. Calculate the 

1. Fixed overhead budget variance 

2. Fixed overhead volume variance 

3. Variable overhead spending variance

Transcribed Image Text:

Direct material, 3 kilograms @ $20 Direct labour, 2 hours @ $14 Variable overhead, 2 hours @ $5 Fixed overhead Standard cost per unit of finished product ? $60 28 10 10