Check my work 3 The standard cost card for the single product manufactured by Cu

Question

Check my work 3 The standard cost card for the single product manufactured by Cutter, Inc., is given below Standard Quantity or Hours 5.3 yards $4.00 per yard 21. 0.7 hours 18.00 per hour 0.7 hours 2.00 per hour 0.7 hours 4.50 per hour 14.28 points Standard Price or Rate Standard Cost Inputs Direct materials Direct labor Variable overhead Fixed overhead 12.60 1.40 3.15 $38.35 Print References Total standard cost per unit Manufacturing overhead is applied to production on the basis of standard direct labor-hours. During the year, the company worked 10,700 hours and manufactured 15,000 units of product. Selected data relating to the company's fixed manufacturing overhead cost for the year are shown below Actual Pixed Overhead Pixed Overhead Applied to Work irn ProcesS Budgeted Pixed Overhead ? hours x $2 per hour $43,000 Budget variance Volume variance, $5,400 P Required: 1. What were the standard hours allowed for the year's production? 2. What was the amount of budgeted fixed overhead cost for the year? 3. What was the fixed overhead budget variance for the year? (Indicate the effect of each variance by selecting "F" for favorable, "U for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.) 4. What denominator activity level did the company use in setting the predetermined overhead rate for the year?

Explanation / Answer

Part 1 - Standard hours allowed for production

10500 hours

(15000 * 0.7)

Part 2 - Budgeted Fixed overhead cost for the year

Calculation through fixed overhead volume variance

Fixed overhead volume variance =

(standard units - Actual units) * standard rate per unit = 5400F

Assume standard units = x

Actual units = 15000

Standard rate per unit = $3.15

Now putting value in formula

(x - 15000) * $3.15 = 5400F

3.15x - $47250 = 5400F

X = 13286 units (standard units)

Now budgeted fixed overhead costs

Formulae = Standard rate * Standard units

13286 * 3.15 = $41850

NOTE : $47250 i.e. $3.15 * 15000 is fixed overhead applied to work in progress

Part 3 - calculation of fixed overhead budget variances

Fixed overhead budget variance = Standard fixed overhead - Actual fixed overhead

Variance = $41850 - $43000 = $1150 U

Part 4 Denominator activity leve (Budgeted activity level)

Formulae :-

Fixed element of predetermined overhead rate ($4.5 per hour) = Budgeted Fixed overhead cost ($41850 / Denominator activity (required 'x')

Hence equation is :-

4.5 = 41850/x

X (denominator activity or budgeted activity) = 9300 Hours

Particulars Units produced 15000 Standard hours per unit 0.7 Standard hours for production (units produced * standard hours per unit)

10500 hours

(15000 * 0.7)

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