Kudos Company has set the following standard costs per unit for the product it manufactures.
|
Direct materials (10 Ibs @ $3 per Ib) |
$30.00 |
|
Direct labor (4 hrs @ $6 per hr) |
24.00 |
|
Overhead (4 hrs @ $250 per hr) |
10.00 |
|
Total standard cost |
$64.00 |
The predetermined overhead rate is based on a planned operating volume of 80% of the productive capacity of 10,000 units per month. The following flexible budget information is available.
|
Operating Levels |
|||
|
|
70% |
80% |
90% |
|
Production in units |
7,000 |
8,000 |
9,000 |
|
Standard direct labor hours |
28,000 |
32,000 |
36,000 |
|
Budgeted overhead |
|
|
|
|
Variable overhead costs |
|
|
|
|
Indirect materials |
$ 8,750 |
$ 10,000 |
$11,250 |
|
Indirect labor |
14,000 |
16,000 |
18,000 |
|
Power |
3,500 |
4,000 |
4,500 |
|
Maintenance |
1,750 |
2,000 |
2,250 |
|
Total variable costs |
28,000 |
32,000 |
36,000 |
|
Fixed overhead costs |
|
|
|
|
Rent of factory building |
12,000 |
12,000 |
12,000 |
|
Depreciation—machinery |
20,000 |
20,000 |
20,000 |
|
Supervisory salaries |
16,000 |
16,000 |
16,000 |
|
Total fixed costs |
48,000 |
48,000 |
48,000 |
|
Total overhead costs |
$76,000 |
$80,000 |
$84,000 |
During May, the company operated at 90% of capacity and produced 9,000 units, incurring the following actual costs.
|
Direct materials (92,000 Ibs @ $295 per Ib) |
|
$271,400 |
|
Direct labor (37,600 hrs @ $605 per hr) |
|
227,480 |
|
Overhead costs |
|
|
|
Indirect materials |
$10,000 |
|
|
Indirect labor |
16,000 |
|
|
Power |
4,500 |
|
|
Maintenance |
3,000 |
|
|
Rent of factory building |
12,000 |
|
|
Depreciation—machinery |
19,200 |
|
|
Supervisory salaries |
17,000 |
81,700 |
|
Total costs |
|
$580,580 |
Required
1. Compute the direct materials variance, including its price and quantity variances.
2. Compute the direct labor variance, including its rate and efficiency variances.
3. Compute these variances: (a) variable overhead spending and efficiency, (b) fixed overhead spending and volume, and (c) total overhead controllable.
4. Prepare a detailed overhead variance report (as in Exhibit 24.15) that shows the variances for individual items of overhead.