Abba Company produces sails for boats. The Houston plant uses a standard costing
ID: 2578291 • Letter: A
Question
Abba Company produces sails for boats. The Houston plant uses a standard costing system with the following standards and actuals.
Direct labor is the basis for applying variable and fixed overhead.
What is practical capacity using standard labor hours?
Standards Direct Labor Standard Rate $ 9 Standard Usage 0.55 hours Variable Overhead Standard Rate $ 8 December Data Budgeted Production for December 31,313 Budgeted Fixed Overhead for December $ 102,797 Number of Sails Produced 39,528 Direct Labor Actual Usage 27,578 hours Actual Variable Overhead Costs $ 212,326 Actual Fixed Overhead Costs $ 167,584Explanation / Answer
Practical capacity = Standard hours per belt *Budgeted production
= .55* 31313
= 17222.15 hours