Reference no: EM131047494
Dixon Manufacturing Company, which makes aluminum alloy wheels for automobiles, recently introduced a new luxury wheel that fits small sports cars. The company developed the following standards for its new product.
Amount of direct materials per wheel 2 pounds
Price of direct materials per pound $7.50
Quality of direct materials per pound 2.5 hours
Price of direct labor per hour $16.00/hour
Total budget fixed overhead $168,000
In its first year of operation, Dixon planned to produce 3, 000 sets of wheels (four wheels pee set). Because of unexpected demand, it actually produced 3,600 set of wheels. By year-end, direct materials purchased and used amount to 30,000 pounds of aluminum at a cost of $234,000. Direct labor cost were actually $16.80 per hour. Actual hours worked were 2.2 hours per wheel. Overhead is applied to products using a predetermined overhead rate based on the total estimated number standards for its new product.
Required
Compute the standard cost per wheel for direct materials, direct labor, and overhead.
Determine the total standard cost per wheel.
Compute the actual cost per wheel for direct materials, direct labor and overhead.
Compute the actual cost per wheel.
Compute the price and usage variances for direct materials and direct materials and direct labor. Identify any variances that Dixon should investigate. Based on your results, offer a possible explanation for the labor usage variance.
Compute the fixed manufacturing overhead cost spending and volume variances. Explain your findings.
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