App8A-207
102.
Cajun Corporation manufactures a labor-intensive product. The cost standards developed
by Cajun appear below. Manufacturing overhead at Cajun is applied to production on the
basis of standard direct labor-hours:
Standard
quantity
per unit
Standard
cost per
ounce or
hour
Standard
cost
per unit
Direct
materials
0.75
ounces
$20.00
$15.00
Direct
labor
1.2 hours
$12.00
14.40
Variable
overhead
1.2 hours
$3.00
3.60
Fixed
overhead
1.2 hours
$5.00
6.00
Total
standard
cost per
unit
$39.00
The standards above were based on an expected annual volume of 8,000 units. The actual
results for last year were as follows:
Number of units produced
8,200
Direct labor-hours incurred
10,000
Ounces of direct materials purchased
7,900
Ounces of direct materials used in
6,070
App8A-208
production
Total cost of direct materials
purchased
$156,815
Total direct labor cost
$122,800
Total variable overhead cost
$28,600
Total fixed manufacturing overhead
cost
$47,500
Required:
Compute the following variances for Cajun.
a. Materials price variance.
b. Materials quantity variance.
c. Labor rate variance.
d. Variable overhead rate variance.
e. Variable overhead efficiency variance.
f. Fixed overhead budget variance.
App8A-210
103.
Nova Corporation produces a single product and uses a standard cost system to help
control costs. Overhead is applied to production on the basis of standard machine-hours.
According to the company’s flexible budget, the following overhead costs should be
incurred at an activity level of 18,000 machine-hours (the denominator activity level
chosen for the current year):
$45,000
108,000
$153,000
During the current year, the following operating results were recorded:
Actual machine-hours worked
15,000
Standard machine-hours allowed
16,000
Actual variable overhead cost incurred
$38,000
Actual fixed manufacturing overhead
cost incurred
$107,100
At the end of the year, the company’s Manufacturing Overhead account showed total
debits for actual overhead costs of $145,100 and total credits of $136,000 for overhead
applied. The difference ($9,100) represents under-applied overhead, the cause of which
management would like to know.
Required:
a. Compute the predetermined overhead rate that would have been used during the year,
showing separately the variable and fixed components of the rate.
b. Show how the $136,000 of overhead actually applied was computed.
c. Analyze the $9,100 under-applied overhead figure in terms of the variable overhead rate
App8A-211
and efficiency variances and the fixed manufacturing overhead budget and volume
variances.
App8A-213
App8A-214
104.
Littleton Manufacturing uses a standard cost system in which manufacturing overhead is
applied to units of product on the basis of standard machine-hours. At standard, each unit
of product requires one machine-hour to complete. The standard variable overhead is
$1.80 per machine-hour and $432,000 per year. The denominator level of activity is
120,000 machine-hours, or 120,000 units. Actual data for the year were as follows:
Actual variable overhead cost
$178,500
Actual fixed manufacturing overhead
cost
$248,000
Actual machine-hours
105,000
Units produced
100,000
Required:
a. What are the predetermined variable and fixed manufacturing overhead rates?
b. Compute the variable overhead rate and efficiency variances.
c. Compute the fixed manufacturing overhead budget and volume variances.
App8A-216
105.
You have just been hired as the new executive assistant to the manager of the Eastern
Division of Global Manufacturing. You have been given the following incomplete records
concerning manufacturing overhead for last year:
Variable overhead rate
$3.50
per DLH
Budgeted fixed
manufacturing overhead
$70,000
Total actual overhead cost
$259,400
Fixed overhead budget
variance
$10,000
Unfavorable
Variable overhead
efficiency variance
$14,000
Unfavorable
Actual direct labor-hours
worked
52,000
DLHs
Denominator activity level
50,000
DLHs
Standard hours per unit
2
DLHs
The company uses a standard cost system in which manufacturing overhead costs are
applied to products on the basis of standard direct labor-hours (DLHs).
Required:
a. Compute the variable overhead rate variance and indicate whether it was favorable or
unfavorable.
b. Compute the fixed overhead volume variance and indicate whether it was favorable or
unfavorable.
App8A-218
106.
Aslett Corporation’s manufacturing overhead includes $3.80 per machine-hour for
supplies; $8.80 per machine-hour for indirect labor; $214,132 per period for salaries; and
$546,720 per period for depreciation.
Required:
Determine the predetermined overhead rate if the denominator level of activity is 6,800
machine-hours. Show your work!
App8A-219
107.
Pierce Corporation uses a standard cost system in which it applies manufacturing
overhead to its product on the basis of standard direct labor-hours (DLHs). Below is the
standard cost card for the product:
Direct materials, 4.5 feet × $3.80 per foot
$17.10
Direct labor, 3.0 DLHs × $9.50 per DLH
28.50
Variable overhead, 3.0 DLHs × $2.00 per
DLH
6.00
Fixed overhead, 3.0 DLHs × $8.00 per
DLH
24.00
$75.60
Last year, the company produced 6,000 units of product using 17,000 direct labor-hours.
The actual total fixed manufacturing overhead cost for the year was $140,000 and the
volume variance was $12,000, favorable.
Required:
a. Determine the budgeted amount of total fixed manufacturing overhead cost.
b. Determine the denominator activity figure that the company used in computing
predetermined overhead rates.
App8A-220
108.
Faessler Corporation applies overhead to products based on machine-hours. The
denominator level of activity is 6,500 machine-hours. The budgeted fixed manufacturing
overhead costs are $242,450. In July, the actual fixed manufacturing overhead costs were
$242,490 and the standard machine-hours allowed for the actual output were 7,000
machine-hours.
Required:
a. Compute the budget variance for July. Show your work!
b. Compute the volume variance for July. Show your work!
App8A-222
109.
Dixie Corporation has provided the following data for June.
Denominator level of activity
2,000
machine-hours
Budgeted fixed manufacturing overhead
costs
$39,200
Fixed component of the predetermined
overhead rate
$19.60
per machine-hour
Actual level of activity
2,300
machine-hours
Standard machine-hours allowed for the
actual output
2,200
machine-hours
Actual fixed manufacturing overhead costs
$40,550
Required:
a. Compute the budget variance for June. Show your work!
b. Compute the volume variance for June. Show your work!
App8A-223
110.
Stenquist Corporation has provided the following data for January.
Denominator level of activity
7,900
machine-
hours
Budgeted fixed manufacturing overhead costs
$95,590
Standard machine-hours allowed for the actual output
8,300
machine-
hours
Actual fixed manufacturing overhead costs
$98,710
Required:
a. Compute the budget variance for January. Show your work!
b. Compute the volume variance for January. Show your work!
App8A-225
111.
Kingdon Corporation’s manufacturing overhead includes $7.10 per machine-hour for
variable manufacturing overhead and $207,000 per period for fixed manufacturing
overhead.
Required:
Determine the predetermined overhead rate for the denominator level of activity of 4,600
machine-hours.