sunburst company set the following standard costs for one unit of its product 648687
Sunburst Company set the following standard costs for one unit of its product.
|
Direct materials (48 kgs. @ $4 per kg.) |
$192.00 |
|
Direct labor (12 hrs. @ $9 per hr.) |
108 |
|
Overhead (12 hrs. @ $4.50 per hr.) |
54 |
|
Total standard cost |
$354.00 |
The predetermined overhead rate ($4.50 per direct labor hour) is based on an expected volume of 50% of the factory’s capacity of 10,000 units per month. Following are the company’s budgeted overhead costs per month at the 50% level.
|
Overhead Budget (50% Capacity) |
||
|
Variable overhead costs |
|
|
|
Indirect materials |
$40,000 |
|
|
Indirect labor |
80,000 |
|
|
Power |
20,000 |
|
|
Repairs and maintenance |
30,000 |
|
|
Total variable overhead costs |
|
$170,000 |
|
Fixed overhead costs |
|
|
|
Depreciation—building |
20,000 |
|
|
Depreciation—machinery |
30,000 |
|
|
Taxes and insurance |
10,000 |
|
|
Supervision |
40,000 |
|
|
Total fixed overhead costs |
|
100,000 |
|
Total overhead costs |
|
$270,000 |
The company incurred the following actual costs when it operated at 40% of capacity in December.
|
Direct materials (196,000 kgs. @ $4.00) |
|
$ 784,000 |
|
Direct labor (46,000 hrs. @ $9.15) |
|
420,900 |
|
Overhead costs |
|
|
|
Indirect materials |
$30,000 |
|
|
Indirect labor |
66,000 |
|
|
Power |
15,600 |
|
|
Repairs and maintenance |
21,000 |
|
|
Depreciation—building |
20,000 |
|
|
Depreciation—machinery |
30,000 |
|
|
Taxes and insurance |
9,600 |
|
|
Supervision |
39,600 |
231,800 |
|
Total costs |
|
$1,436,700 |
Required
1. Examine the monthly overhead budget to (a) determine the costs per unit for each variable overhead item and its total per unit costs, and (b) identify the total fixed costs per month.
2. Prepare flexible overhead budgets (as in Exhibit 24.12) for December showing the amounts of each variable and fixed cost at the 40%, 50%, and 60% capacity levels.
3. Compute the direct materials cost variance, including its price and quantity variances.
4. Compute the direct labor cost variance, including its rate and efficiency variances.
5. Prepare a detailed overhead variance report (as in Exhibit 24.15) that shows the variances for individual items of overhead.