Crane Companys produces brass faucets and has the following standard costs per faucet: Direct materials $55.00 Direct
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Question:
Crane Company’s produces brass faucets and has the following standard costs per faucet:
Direct materials $55.00
Direct labour 22.50
Variable overhead (0.75 direct labour hours at $10)* 7.50
Fixed overhead (0.75 direct labour hours at $16)* 12.00
Total standard cost per faucet $97.00
*overhead rates are based on a denominator activity level of 6,000 direct labour hours During 2021, Crane Company produced and sold 7,700 faucets.
The denominator level of activity represents 60% of theoretical capacity and 75% of practical capacity.
Required:
- Calculate the total overhead costs at the theoretical, practical, denominator and actual level of activity.
- Crane Company can sell the faucets it produces for $175 per unit, calculate the opportunity cost of producing 7,700 faucets in 2021 compared to theoretical, practical and denominator capacity utilization.
Expert Answer:
Computation of units produced at Different Capacity And Activity Levels Denominato Ac... View the full answer
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