Mills allocates manufacturing overhead to production based on standard direct labor hours. Mills reported the following actual
Question:
Mills allocates manufacturing overhead to production based on standard direct labor hours. Mills reported the following actual results for 2018:
Actual number of units produced: 1,000
Actual variable overhead: $4000
Actual fixed overhead: $3,100
Actual direct labor hours: 1,600
Note: 1. VOH Coat Var. $1,600U
Info from E23-18
Murr, Inc. produced 1,000 units of the company's product in 2018, The standard quantity of direct materials was three yards of cloth per unit at a standard cost of $1.35 per yard. The accounting records showed that 2,500 yards of cloth were used and the company paid $1.40 per yard. Standard time was two direct labor hours per unit at a standard rate of$10.00 per direct labor hour. Employees worked 1,700 hours and were paid $9.50 per hour
Mills Inc. Is a competitor of murry, Inc. from exercise E23-18. Mills also uses a standard cost system and provides the following info.
Static budget variable overhead | $1,200 |
Static budget fixed overhead | $1,600 |
Static budget direct labor hours | 800 hours |
Static budget number of units | 400 units |
Standard direct labor hours | 2 hours per unit |
Figure out and analyze: The requirements
1. Compute the variable overhead cost and efficiency variances and fixed overhead cost and volume variances.
2. EXPLAIN (as best you can) why the variances are favorable or unfavorable. Based on cost and efficiency budget standards.