16-101
Variable
$10,000
Fixed
$8,800
122.
Ole Company manufactures special electrical equipment and parts. Ole employs a
standard cost accounting system with separate standards established for each product.
A special transformer is manufactured in the Transformer Department. Production volume
is measured by direct labor hours in this department and a flexible budget system is used
to plan and control department overhead. Standard costs for the special transformer are
determined annually in September for the coming year. The standard cost of a transformer
16-102
was computed at $57.00 as shown below.
Direct materials:
Copper
3 spools
@ $3.00
9.00
Direct labor
4 hours
@ $7.00
28.00
Variable overhead
4 hours
@ $3.00
12.00
Fixed overhead
4 hours
@ $2.00
8.00
Total
$57.00
Overhead rates were based upon normal and expected monthly capacity, both of which
were 4,000 direct labor hours. Practical capacity for this department is 5,000 direct labor
hours per month. Variable overhead costs are expected to vary with the number of direct
labor hours actually used.
During October, 900 transformers were produced. This was below expectations because a
work stoppage occurred during contract negotiations with the labor force. Once the
contract was settled, the wage rate was increased to $7.25/hour and overtime was
scheduled in an attempt to catch up to expected production levels.
The following costs were incurred in October:
purchased 2,600 spools @
$3.08/spool
Used: 2,600 spools
2,000 hours @ $7.00
1,400 hours @ $7.25
600 of the 1,400 hours were subject to overtime premium. The total overtime premium is
included in variable overhead in accordance with company accounting practices.
Overhead:
Variable
$16,670
16-103
Fixed
$8,800
16-104
123.
The Bartok Company uses a standard cost accounting system and estimates production
for the year to be 60,000 units. At this volume, the company’s variable overhead costs are
$0.50 per direct labor hour.
The company’s single product has a standard cost of $30.00 per unit. Included in the
$30.00 is $13.20 for direct materials (3 yards) and $12.00 of direct labor (2 hours).
Production information for the month of March follows:
Number of units produced
6,000
Materials purchased (18,500 yards)
$88,800
Materials used in production (yards)
18,500
Variable overhead costs incurred
$6,380
Fixed overhead costs incurred
$20,400
Direct labor cost incurred ($6.50/hour)
$75,400
16-106
124.
The condensed flexible budget of the Evergreen Company for the year is given below:
Direct labor-hours
Direct labor- hours
Overhead costs:
30,000
40,000
50,000
Variable costs
$75,000
?
?
Fixed costs
?
?
$320,000
The company produces a single product that requires 2.5 direct labor-hours to complete.
The direct labor wage rate is $7.50 per hour. Three yards of raw material are required for
each unit of product, at a cost of $5 per yard.
Assume that the company chooses 50,000 direct labor-hours as the denominator level of
activity, but actually worked 48,000 hours during the year, producing 18,500 units.
Actual overhead costs for the year are:
Variable costs
$124,800
Fixed costs
321,700
Total overhead costs
$446,500
16-108
125.
The condensed flexible budget of the Texas Company for the year is given as $160,000 +
$1.25/direct labor hour. The company produces a single product that requires 2.5 direct
labor-hours to complete.
Assume that the company chooses 100,000 direct labor-hours as the denominator level of
activity, but actually worked 96,000 hours during the year producing 37,000 units.
Actual overhead costs for the year are:
Variable costs
$124,800
Fixed costs
158,800
Total overhead costs
$283,600
126.
The following information relates to the month of April for The Trolley Manufacturing
Company, which uses a standard cost accounting system.
Actual direct labor hours used
7,000
16-109
Standard hours allowed for good output
7,500
Fixed overhead spending variance –
unfavorable
$300
Actual total overhead
$16,000
Budgeted fixed costs
$4,500
Normal activity in hours
6,000
Total overhead application rate per DLH
$2.25
127.
The data below relate to a product of AirWay Company.
Standard costs:
Labor, 3 hours at $15 per hour
$45
per
16-110
unit
Variable overhead at $8 per
labor hour
$24
per
unit
Budgeted fixed production
costs
$140,000
per
year
Budgeted production for the
year
4,000
units
Actual results were:
Production
3,600
Units
Labor, 10,360 hours
$160,580
Overhead incurred ($142,700
fixed)
$222,200
16-111
128.
The Matten Company has developed standard overhead costs based upon a capacity of
180,000 direct labor hours:
Standard costs per unit:
Variable portion
2 hours @ $3 =
$6
Fixed portion
2 hours @ $5 =
10
$16
129.
The following information relates to the month of April for The Kennedy Manufacturing
Company, which uses a standard cost accounting system.
Actual total direct labor
$43,400
Actual direct labor
14,000
16-112
hours used
Standard hours allowed
for good output
15,000
Variable overhead price
variance – unfavorable
$1,400
Actual total overhead
$32,000
Budgeted fixed costs
$9,000
Normal activity in hours
12,000
Total overhead
application rate per
DLH
$2.25
130.
The Fort Company produces and sells a single product. Standards have been established
16-113
for the product as follows:
Direct materials: 5 pounds @ $3.50 per pound = $17.50
Direct labor: 3 hours @ $5.50 per hour = $16.50
Actual cost and usage figures for the past month follow:
Units produced
750
Direct materials used
4,000
pounds
Direct materials purchased
(4,500 pounds)
$14,400
Direct labor cost (2,000 hours)
$11,200
Accounts Payable
16-115
131.
The following standards have been established for a raw material used in the production
of product U98:
Standard quantity of the
material per unit of output
2.6
pounds
Standard price of the material
$14.50
per
pound
The following data pertain to a recent month’s operations:
Actual material
purchased
7,600
Pounds
Actual cost of material
purchased
$110,960
Actual material used in
production
7,300
Pounds
Actual output
2,800
units of
product U98
16-117
132.
16-118
133.
Compound Y23Z is used by Overton Corporation to make one of its products. The standard
cost of compound Y23Z is $38.70 per ounce and the standard quantity is 4.6 per unit of
output. Data concerning the compound in the most recent month appear below:
Cost of material purchased in November,
per ounce
$39.20
Material purchased in November, ounces
2,800
Material used in production in November,
ounces
2,360
Actual output in November, units
500
Raw materials ($38.70 × 2,800
Materials price variance (2,800
Accounts payable ($39.20 ×
134.
135.
Angler Corporation has provided the following data concerning its direct labor costs for
November: