Flandro Company uses a standard cost system and sets its predetermined overhead
ID: 2592400 • Letter: F
Question
Flandro Company uses a standard cost system and sets its predetermined overhead rate on the basis of direct labor-hours. The following data are taken from the company's planning budget for the current year: Denominator activity (direct labor-hours) Variable manufacturing overhead cost Fixed manufacturing overhead cost 15,000 52,500 $113,250 The standard cost card for the company s only product is given below Standard Cost Standard Quantity or Hours Standard Price or Rate 4 yards 2.30 per yard $9.20 Inputs Direct materials Direct labor Manufacturing overhead Total standard cost per unit 2 hours 8.50 per hour 2 hours 11.05 per hour 17.00 22.10 48.30 During the year, the company produced 7,800 units of product and incurred the following actual results Materials purchased, 49,500 yards at $2.20 per yard Materials used in production (in yards) Direct labor cost incurred, 16,000 hours at $8.30 per hour Variable manufacturing overhead cost incurred Fixed manufacturing overhead cost incurred $ 108,900 32,150 $ 132,800 $ 52,650 105,600Explanation / Answer
Step 1: A new standard cost that separetes the variable manufacturing overhead per unit and fixed manufacturing overhead per unit.
Step 2: Calculation of Variances
(a) Material Price Variance-
=(Actual Quantity x Actual Price) - (Actual Quantity x Standard Price)
=(7800 x $2,20) - (7800 x $2.30)
= $780 (Favorable)
(b) Quantity Variance
=Standard Price x (Actual quantity - Standard quantity)
=$2.30 x (32150- (7800*4 yards))
=$2185 (Adverse)
(c) Labour Rate Variance
= (Actual quantity x Actual rate) - (Actual quantity x Standard Rate)
=(16000 x $8.30) -( 7800*2 hrs) x $8.50)
=$132,800 - $132,600
=$200 (Adverse)
(d) Labour Efficiency Variance
=(Actual hours x Standard Rate) - (Standard hours x Standard Rate)
=(16000 x $8.50) - ((7800*2) x $8.50)
=$136,000 - $132,600
=$3400 (Adverse)
(e)Variable Overhead Rate Variance
=Actual Quantity x (Standard Rate - Actual Rate)
=7800 units x ( $7 per unit - ($52650/7800))
=$1950 (Favourable)
(f) Variable overhead efficiency Varaince
=Standard Overhead Rate x (Actual hours - Standard hours)
=$7 x (16000-(7800*2))
=$2800 (Adverse)
(g)Fixed Overhead budget variance
=Actual Fixed Overhead - Budgeted Fixed Overhead
=$105,600 - (7800 units x $15.10 per unit)
=$12,180 (Favourable)
(h) Fixed Overhead Volume variance
=Absorbed Fixed Overhead - Budgeted fixed Overhead
=(7800 x $15.10) - $113,250
=$4530 (Favourable)
Inputs Std Qty or Hrs (1) Std Price or Rate (2) Std Cost (1*2) Direct Materials 4 yards $2.30 per yard $9.20 Direct Labour 2 Hours $8.50 per hour $17 Variable Manufacturing Overhead($52500/15000 hrs) 2 Hours $3.5 per hour $7 Fixed Manufacturing overhead ($113,250/15000 hours) 2 Hours $7.55 per hour $15.10 Total Standard cost per unit $48.30Related Questions
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