Exercise 11-12 (Part Level Submission) Byrd Company produces one product, a putt
ID: 2487085 • Letter: E
Question
Exercise 11-12 (Part Level Submission)
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 125,000 units per year. The total budgeted overhead at normal capacity is $625,000 comprised of $250,000 of variable costs and $375,000 of fixed costs. Byrd applies overhead on the basis of direct labor hours.
During the current year, Byrd produced 70,300 putters, worked 84,900 direct labor hours, and incurred variable overhead costs of $95,257 and fixed overhead costs of $306,523.
(a)
Variable
Fixed
Exercise 11-12 (Part Level Submission)
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 125,000 units per year. The total budgeted overhead at normal capacity is $625,000 comprised of $250,000 of variable costs and $375,000 of fixed costs. Byrd applies overhead on the basis of direct labor hours.
During the current year, Byrd produced 70,300 putters, worked 84,900 direct labor hours, and incurred variable overhead costs of $95,257 and fixed overhead costs of $306,523.
Explanation / Answer
Budgeted labour hours requiredd to produce budgted 125000 units @ 1 hour per unit = 125000 hours
Predetermined variable overhead rate
= Budgeted variable overhead / Budgeted number of units produced
= $250000 / 125000 hours
= $2 / hour
Predetermined Fixed Overhead rate
= Budgeted Fixed overhead / Budgeted labour hours
= $375000 / 125000 hours
= $3 / hour
Variable Overhead applied
= 70300 putters x Standard hours per unit x Predtermined variable overhead rate per hour
= 70300 x 1 hour x $2/hour
= $140600
Fixed overhead applied
= Actual hours used x predetermined fixed overhead rate
= 84900 hours x $3 / hour
= $254700
Total overhead applied = $140600 + $254700 = $395300
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