3 (10 points). The Deep Thought Company is making 42 supercomputers. Deep Though
ID: 2535589 • Letter: 3
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3 (10 points). The Deep Thought Company is making 42 supercomputers. Deep Thought's costing system has two direct-cost categories: direct materials and direct manufacturing labor. Manufacturing overhead (both variable and fixed) is allocated to the supercomputers on the basis of standard direct manufacturing labor-hours (DLH). At the beginning of 2017, Deep Thought adopted the following standards for its manufacturing costs Input 5 lb. at $4 per lb 4 hrs. at $16 per hr Cost per Output Unit $ 20.00 Direct materials Direct manufacturing labor Manufacturing overhead 64.00 $8 per DLH $9 per DLH 32.00 36.00 $152.00 Variable Fixed Standard manufacturing cost per output unit The denominator level for total manufacturing overhead per month in 2017 is 37,000 direct manufacturing labor-hours. Deep Thought's budget for January 2017 was based on this denominator level. The records for January indicated the following: Direct materials purchased Direct materials used Direct manufacturing labor Total actual manufacturing overhead (variable and fixed) Actual production Required 1. Prepare a schedule of total standard manufacturing costs for the 7,600 output units in January 2017 2. For the month of January 2017, compute the following variances, indicating whether each is 40,300 lb. at $3.80 per lb 37,300 lb. 31,400 hrs. at $16.25 per hr $650,000 7,600 output units favorable (F) or unfavorable (U): a. Direct materials price variance, based on purchases b. Direct materials efficiency variance c. Direct manufacturing labor price variance d. Direct manufacturing labor efficiency variance e. Total manufacturing overhead spending variance f. Variable manufacturing overhead efficiency variance g. Production-volume varianceExplanation / Answer
(1) - Schedule of standard Manufacturing costs for 7600 output
(2) (a) Material Price variance (Based on purchased)
(Standard Price - Actual Price)*Actual units purchased
($4 - $3.8)*40300 = $8060 Favourable
(b) Material Efficiency variance (Based on consumption)
Standard quantity used = (7600*5) = 38000
(Standard Quantity used - Actual Quantity used)*Standard Cost
(38000 - 37300)*$4 = $2800 Favourable
(c) Labour Price Variance
(Standard Rate - Actual Rate)*Actual Hours used
($16 - $16.25)*31400 = $7850 Unfavourable
(d) Labour Efficiency Variance
Standard Labour Hours = (4*7600) = 30400
(Standard Hours - Actual Hours)*Standard Rate
(30400 - 31400)*$16 = $1600 Unfavourable
Particulars Amount Direct Material (7600*$20) $152000 Direct Manufacturing labour (7600*$64) $486400 Manufacturing overhead : Variable (7600*$32) $243200 Fixed (7600*$36) $273600 Total Manufacturing costs $1155200Related Questions
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