Crowe Corporation has developed a standard cost system to account for its manufa

Question

Crowe Corporation has developed a standard cost system to account for its manufacturing operations. It has determined that for one of the products that it manufactures the attached standard costs and quantities apply Crowe estimated at the beginning of the year that they would incur $100,000 of variable manufacturing overhead costs in the Cutting Department while working 40,000 direct labor hours They also estimated that they would incur $120,000 of variable manufacturing overhead costs in the Assembly Department while working 24,000 direct labor hours and using 20,000 machine hours Fixed manufacturing overhead was budgeted at $120,000 which is to be applied based upon the number of direct labor hours worked in the Assembly Department. The actual results for producing 85,000 units during the current year are also attached. REQUIRED: Calculate the following items based upon the attached information. Round all rates to the nearest cent (two decimal places) and all variances to the nearest whole dollar (a) Predetermined Variable Manufacturing Overhead Rate for the Cutting Department. Predetermined Variable Manufacturing Overhead Rate for the Assembly Department. (b) (c)Predetermined Fixed Manufacturing Overhead Rate (d)Direct Materials Price Variance. e) Direct Materials Quantity Variance (f)Direct Labor Price (Rate) and Quantity (Efficiency) Variance for the Cutting (g)Direct Labor Price (Rate) and Quantity (Efficiency) Variance for the (h)Variable Manufacturing Overhead Price (Spending) and Quantity (Efficiency) (i)Variable Manufacturing Overhead Price (Spending) and Quantity (Efficiency) Department. Assembly Department. Variance for the Cutting Department. Variance for the Assembly Department (j)Fixed Manufacturing Overhead Price (Spending) Variance (k) Fixed Manufacturing Overhead Volume (Quantity) Variance.

Explanation / Answer

j) Fixed Manufacturing Overhead Price Variance = Budgeted Fixed MOH - Actual Fixed MOH

= $120,000 - $118,500 = $1,500 Favorable

k) Budgeted labor hours in Assembly Deptt = 24,000 hrs

Budgeted Fixed OH rate per hour = Budgeted Fixed MOH/Budgeted Labor hrs in Assembly

= $120,000/24,000 hrs = $5 per labor hour

Applied Fixed MOH = Actual labor hrs in Assembly*Budgeted Fixed OH rate per hour

= 26,000 hrs*$5 per hour = $130,000

Fixed MOH Volume Variance = Applied Fixed MOH - Budgeted Fixed MOH

= $130,000 - $120,000 = $10,000 Favorable

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