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.