Reference no: EM132549713

Modern Company uses a standard cost system in which manufacturing overhead costs are applied to units of product on the basis of standard direct labor-hours. The company's standards are based on variable manufacturing overhead of $3 per direct labor-hour and fixed manufacturing overhead of $300,000 per year. The denominator level of activity is 30,000 direct labor-hours. Standards call for 2.5 direct labor-hours per unit of output. Actual activity and manufacturing overhead costs for the year are given below:

Units produced                              12,800    units
Direct labor-hours used                    31,600
Direct labor-hours

Overhead costs incurred:
Variable costs                                      $96,000
Fixed costs                                        $297,000

Required:

Question a. Calculate the standard hours allowed for the output.

Question b. Calculate the variable manufacturing overhead efficiency and rate variances. Explain the meanings of the variable manufacturing overhead efficiency and rate variances that you calculated.

Question c. Calculate the fixed manufacturing overhead budget and volume variances. Explain the meanings of the fixed manufacturing overhead budget and volume variances that you calculated.