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compute the variable manufacturing overhead spending and efficiency variances 665675

Eastern Company uses a standard cost system in which manufacturing overhead is applied to units of product on the basis of standard direct labor hours (DLHs). The denominator activity level is 60,000 direct labor hours, or 300,000 units.

• A standard cost card for the company’s product follows:

Standard

quantity or

Standard price or

Standard

hours

rate

cost

Direct materials

0.25 kilogram

$16 per kilogram

$4

Direct labor

0.20 DLH

$10 per DLH

2

Variable overhead

0.20 DLH

$5 per DLH

1

Fixed overhead

0.20 DLH

$10 per DLH

2

Total standard cost

$9

• Actual data for the year follow:

Units produced and sold

330,000

Actual direct labor hours worked

64,800

Actual variable manufacturing overhead cost

$327,240

Actual fixed manufacturing overhead cost

$612,000

Required:

a. Compute the variable manufacturing overhead spending and efficiency variances.

b. Compute the fixed manufacturing overhead budget and volume variances.

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