Fladro Company uses a standard cost system and sets its default overhead rate based on direct labor
Question:
Fladro Company uses a standard cost system and sets its default overhead rate based on direct labor hours. The following data is taken from the company's planning budget for the current year:
Activity denominator (direct labor-hours) | 14,000 | |
Variable manufacturing overhead | ps | 49,700 |
Fixed Cost of Manufacturing Overhead | ps | 97,300 |
The standard cost card for the company's single product is provided below:
Appetizer | (1) Standard Quantity or Hours | (2) Standard Price or Rate | Standard Cost (1) × (2) | ||||
Direct materials | 4 yards | ps | 2.35 | por yard | ps | 9.40 | |
Direct labour | 2 hours | ps | 8.75 | per hour | 17.50 | ||
Manufacturing overhead | 2 hours | ps | 10.50 | per hour | 21.00 | ||
Total standard cost per unit | ps | 47.90 | |||||
During the year, the company produced 7,280 units of product and incurred the following actual results:
Purchased materials, 46,200 yards at $2.25 per yard | ps | 103,950 | |
Materials used in production (in yards) | 30,030 | ||
Direct labor cost incurred, 15,000 hours at $8.35 per hour | ps | 125,250 | |
Variable manufacturing overhead cost incurred | ps | 50,100 | |
Fixed manufacturing overhead cost incurred | ps | 99,750 | |
Required:
1. Create a new standard cost card that separates variable manufacturing overhead per unit and fixed manufacturing overhead per unit.
2. Calculate the price and quantity variances of the materials. Also, calculate the labor rate and efficiency variances.
3. Calculate the variable overhead rate and efficiency variances. Also, calculate the fixed overhead budget and volume variances.
Horngrens Financial and Managerial Accounting
ISBN: 978-0133866292
5th edition
Authors: Tracie L. Nobles, Brenda L. Mattison, Ella Mae Matsumura