Franklin Glass Works uses a standard cost system in which manufacturing overhead

Question

Franklin Glass Works uses a standard cost system in which manufacturing overhead is applied on the basis of standard direct labor-hours. Each unit requires five standard hours of direct labor for completion. The denominator activity for the year was based on budgeted production of 170,000 units. Total overhead was budgeted at $2,250,000 for the year, and the fixed manufacturing overhead rate was $2.50 per direct labor-hour. The actual data pertaining to the manufacturing overhead for the year are presented below:

Franklin's fixed manufacturing overhead volume variance for the year is:

Austin Wool Products purchases raw wool and processes it into yarn. The spindles of yarn can then be sold directly to stores or they can be used by Austin Wool Products to make afghans. Each afghan requires one spindle of yarn. Current cost and revenue data for the spindles of yarn and for the afghans are as follows:

Each month 4,600 spindles of yarn are produced that can either be sold outright or processed into afghans.

If Austin chooses to produce 4,600 afghans each month, the change in the monthly net operating income as compared to selling 4,600 spindles of yarn is:

Humes Corporation makes a range of products. The company's predetermined overhead rate is $24 per direct labor-hour, which was calculated using the following budgeted data:

Management is considering a special order for 780 units of product J45K at $72 each. The normal selling price of product J45K is $83 and the unit product cost is determined as follows:

If the special order were accepted, normal sales of this and other products would not be affected. The company has ample excess capacity to produce the additional units. Assume that direct labor is a variable cost, variable manufacturing overhead is really driven by direct labor-hours, and total fixed manufacturing overhead would not be affected by the special order.

What would be the impact on the company's overall profit? (Input the amount as a positive value. Round your intermediate calculations to 2 decimal places and final answer to the nearest dollar amount. Omit the "$" sign in your response.)

Franklin Glass Works uses a standard cost system in which manufacturing overhead is applied on the basis of standard direct labor-hours. Each unit requires five standard hours of direct labor for completion. The denominator activity for the year was based on budgeted production of 170,000 units. Total overhead was budgeted at $2,250,000 for the year, and the fixed manufacturing overhead rate was $2.50 per direct labor-hour. The actual data pertaining to the manufacturing overhead for the year are presented below:

Explanation / Answer

Franklin's fixed manufacturing overhead volume variance for the year is:

$25,000 unfavorable

If Austin chooses to produce 4,600 afghans each month, the change in the monthly net operating income as compared to selling 4,600 spindles of yarn is:

$23,000 increase

What would be the impact on the company's overall profit? (Input the amount as a positive value. Round your intermediate calculations to 2 decimal places and final answer to the nearest dollar amount. Omit the "$" sign in your response.)

Total increase in profit = $5460

$25,000 unfavorable

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