Compute the predetermined variable overhead rate

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Reference no: EM13962617

1. Stefani Company has gathered the following information about its product.

Direct materials. Each unit of product contains 4.5 pounds of materials. The average waste and spoilage per unit produced under normal conditions is 0.5 pounds. Materials cost $5 per pound, but Stefani always takes the 2% cash discount all of its suppliers offer. Freight costs average $0.25 per pound.

Direct labor. Each unit requires 2 hours of labor. Setup, cleanup, and downtime average 0.4 hours per unit. The average hourly pay rate of Stefani's employees is $12. Payroll taxes and fringe benefits are an additional $3 per hour.

Manufacturing overhead. Overhead is applied at a rate of $7 per direct labor hour.

Instructions

Compute Stefani's total standard cost per unit.

2. Lewis Company's standard labor cost of producing one unit of Product DD is 4 hours at the rate of $12.00 per hour. During August, 40,600 hours of labor are incurred at a cost of $12.15 per hour to produce 10,000 units of Product DD.

Instructions

(a) Compute the total labor variance.

(b) Compute the labor price and quantity variances.

3. Byrd Company produces one product, a putter called GO-Putter. Byrd uses a standard cost system and determines that it should take one hour of direct labor to produce one GO-Putter. The normal production capacity for this putter is 100,000 units per year. The total budgeted overhead at normal capacity is $850,000 comprised of $250,000 of variable costs and $600,000 of fixed costs. Byrd applies overhead on the basis of direct labor hours.

During the current yew; Byrd produced 95,000 putters, worked 94,000 direct labor hours, and incurred variable overhead costs of $256,000 and fixed overhead costs of $600,000.

Instructions

(a) Compute the predetermined variable overhead rate and the predetermined fixed overhead rate.

(b) Compute the applied overhead for Byrd for the year

4. Ayala Corporation accumulates the following data relative to jobs started and finished during the month of June 2017.

Costs and Production Data	Actual	Standard
Raw materials unit cost	$2.25	$2.10
Raw materials units used	10,600	10,000
Direct labor payroll	$120,960	$120,000
Direct labor hours worked	14,400	15,000
Manufacturing overhead incurred	$189,500
Manufacturing overhead applied		$193,500
Machine hours expected to be used at normal capacity		42,500
Budgeted fixed overhead for June		$55,250
Variable overhead rate per machine hour		$3.00
Fixed overhead rate per machine hour		$1.30

Overhead is applied on the basis of standard machine hours. Three hours of machine time are required for each direct labor hour. The jobs were sold for $400,000. Selling and administrative expenses were $40,000. Assume that the amount of raw materials purchased equaled the amount used.

Instructions

(a) Compute all of the variances for (1) direct materials and (2) direct labor.

(b) Compute the total overhead variance.

Reference no: EM13962617

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