E7-9 Calculating factory overhead The normal capacity of a manufacturing plant i
ID: 2471143 • Letter: E
Question
E7-9 Calculating factory overhead The normal capacity of a manufacturing plant is 5,000 units per month. Fixed overhead at this volume is $2,500, and variable overhead is $7,500. Additional data follow: Month 1 Month 2 Actual production (units) . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,200 4,500 Actual factory overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . $10,100 $9,200 a. Calculate the amount of factory overhead allowed for the actual levels of production. b. Compute the overhead application rate per unit at the various levels of production. (Round to the nearest whole cent.) E7-10 Calculating factory overhead The normal capacity of a factory is 8,000 units per month. Cost and production data follow: Standard application rate for fixed overhead . . . . . . . . . . . . . . . . $0.50 per unit Standard application rate for variable overhead . . . . . . . . . . . . . $1.50 per unit Production—Month 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,200 units Production—Month 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,400 units Actual factory overhead—Month 1 . . . . . . . . . . . . . . . . . . . . . . . . . $ 14,700 Actual factory overhead—Month 2 . . . . . . . . . . . . . . . . . . . . . . . . . $ 17,400 Calculate the amount of factory overhead allowed for the actual volume of production each month and the variance between budgeted and actual overhead for each month. PROBLEMS P7-1 Production, direct materials, and direct labor budget The sales department of Optimo Company has forecast sales for May 2011 to be 40,000 units. Additional information follows: Finished goods inventory, May 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000 units Finished goods inventory, May 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Materials used in production: Required Inventory May 1 Required Inventory May 31 Standard Cost X (one gallon per unit) . . . . . . . . . . . . . 1,000 gal 2,000 gal $4 per gal Y (one pound per unit) . . . . . . . . . . . . . 2,000 lb 2,000 lb $ 2 per lb LO4 LO4 LO2 Chapter 7 – The Master Budget and Flexible Budgeting 371
Explanation / Answer
E7-9) a) Factory overhead allowed for the actual levels of production =
Per unit of production = 2500+7500 / 5000 = $2
month 1 = 5200 * 2 = $10400
month 2 = 4500 * 2 = $9000
b) overhead application rate per unit at normal capacity of 5000 = 10000 / 5000 = $2 per unit
at normal capacity of 7500 = 10000 / 7500 = $1.34 per unit
at normal capacity of 10000 = 10000 / 10000 = $1 per unit
E-7-10)
factory overhead allowed for the actual volume of production each month=
Month 1- 7200 units = (0.50 + 1.50) 7200 = $14400
Month 2- 8400 units = (0.50 + 1.50) 8400 = $16800
the variance between budgeted and actual overhead for each month=
budgeted overhead allowed - actual overhead allowed
Month 1 = 14400 - 14700 = $300 UF
Month 2 = 16800 - 17400 = $600 UF
P-7-1)
sorry incomplete information, So could not solve.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.