Plimpton Company produces countertop ovens. Plimpton uses a standard costing sys
ID: 2444660 • Letter: P
Question
Plimpton Company produces countertop ovens. Plimpton uses a standard costing system. The standard costing system relies on direct labor hours to assign overhead costs to production. The direct labor standard indicates that two direct labor hours should be used for every oven produced. The normal production volume is 100,000 units. The budgeted overhead for the coming year is as follows:
Plimpton applies overhead on the basis of direct labor hours.
During the year, Plimpton produced 97,000 units, worked 196,000 direct labor hours, and incurred actual fixed overhead costs of $780,000 and actual variable overhead costs of $435,600.
Required:
1. Calculate the standard fixed overhead rate and the standard variable overhead rate. Round your answers to the nearest cent. Use rounded answers in the subsequent computations.
2. Compute the applied fixed overhead and the applied variable overhead. Use the application rates from part (1) in your calculations.
What is the total fixed overhead variance?
$
What is the total variable overhead variance?
$
3. Break down the total fixed overhead variance into a spending variance and a volume variance.
4. Compute the variable overhead spending and efficiency variances.
5. Now assume that Plimpton’s cost accounting system reveals only the total actual overhead. In this case, a three-variance analysis can be performed. Using the relationships between a three- and four-variance analysis, indicate the values for the three overhead variances.
Standard fixed overhead rate $ per direct labor hour Standard variable overhead rate $ per direct labor hourExplanation / Answer
Answer: 1
Answer: 2
Answer: 3
Answer: 4
Answer: 5
Hours Required Per Unit (Standard Hours) 2 Production Volume 100000 Total Hours required 200000 Fixed Overhead 770000 Total Hours required 200000 Standard Rate per hour 770000/200000 $3.85 /hour Variable Overhead 444000 Total Hours required 200000 Standard Rate per hour 444000/200000 $2.22 /hour