Reference no: EM132963049
M&M Manufacturing Company's standard costing system allocates manufacturing overhead to products on the basis of direct labour hours (DLH). At the beginning of 2021, M&M adopted the following standards for its manufacturing costs:
Cost per Unit
Direct materials 3 kg. at $5 per kg.$15
Direct labour 5 hours at $15 per hour $75
Manufacturing overhead $14 per hour?
Standard cost per unit?
The denominator activity level for 2021 is 480,000 direct labour hours and the company expects production to be spread out evenly throughout the year (on a monthly basis). The flexible budget variable manufacturing overhead for January was $234,000 and variable manufacturing overhead was over-applied by $4,000 in January.
The accounting records for January indicate the following:
Direct materials purchased 25,000 kg. at $5.20 per kg.
Direct materials used 23,100 kg.
Direct labour40,100 hours at $14.60 per hour
Actual manufacturing overhead $600,000
Production 7,800 units
Required:
Problem 1. Calculate the total standard cost to manufacture the 7,800 units in January (by cost category and in total).
Problem 2. For January 2021, calculate all the cost variances (indicating the name of each variance).
Problem 3. What is the under/over-applied manufacturing overhead?
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