Franklin Glass Works uses a standard cost system in whichmanufacturing overhead is applied on the basis of standard directlabor-hours. Each unit requires five standard hours of direct laborfor completion. The denominator activity for the year was based onbudgeted production of 170,000 units. Total overhead was budgetedat $2,250,000 for the year, and the fixed manufacturing overheadrate was $2.50 per direct labor-hour. The actual data pertaining tothe manufacturing overhead for the year are presentedbelow:
Actual production 168,000 units Actual direct labor-hours 410,000 direct labor-hours Actual variable manufacturing overhead $322,000 Actual fixed manufacturing overhead $572,000
Franklin'sfixed manufacturing overhead volume variance for the yearis:
$25,000 unfavorable $8,500 favorable $313,500 favorable $47,500 unfavorable
Austin Wool Products purchases raw wool and processes it into yarn.The spindles of yarn can then be sold directly to stores or theycan be used by Austin Wool Products to make afghans. Each afghanrequires one spindle of yarn. Current cost and revenue data for thespindles of yarn and for the afghans are as follows:
Data for one spindle of yarn: Selling price $12 Variable production cost $8 Fixed production cost (based on 4,600 spindles of yarnproduced) $2 Data for one afghan: Selling price $31 Production cost per spindle of yarn $10 Variable production cost to process the yarn into anafghan $9 Avoidable fixed production cost to process the yarninto an afghan
(based on 4,600 afghans produced) $5
Each month 4,600 spindles of yarn are produced that can either besold outright or processed into afghans.
If Austin chooses to produce 4,600 afghans each month, the changein the monthly net operating income as compared to selling 4,600spindles of yarn is:
$18,400 decrease $18,400 increase $23,000 decrease $23,000 increase
Humes Corporation makes a range of products. The company'spredetermined overhead rate is $24 per direct labor-hour, which wascalculated using the following budgeted data:
Variable manufacturing overhead $ 84,000 Fixed manufacturing overhead $ 420,000 Direct labor-hours 21,000
Management is considering a special order for 780 units of productJ45K at $72 each. The normal selling price of product J45K is $83and the unit product cost is determined as follows:
Direct materials $ 45.00 Direct labor 16.00 Manufacturing overhead applied 24.00
Unit product cost $ 85.00
If the special order were accepted, normal sales of this and otherproducts would not be affected. The company has ample excesscapacity to produce the additional units. Assume that direct laboris a variable cost, variable manufacturing overhead is reallydriven by direct labor-hours, and total fixed manufacturingoverhead would not be affected by the special order.
Required: What would be the impact on the company's overall profit? (Input the amount as apositive value. Round your intermediate calculations to 2 decimalplaces and final answer to the nearest dollar amount. Omit the "$"sign in your response.)
Total (Click to select)decreaseincrease in profit $
Franklin Glass Works uses a standard cost system in whichmanufacturing overhead is applied on the basis of standard directlabor-hours. Each unit requires five standard hours of direct laborfor completion. The denominator activity for the year was based onbudgeted production of 170,000 units. Total overhead was budgetedat $2,250,000 for the year, and the fixed manufacturing overheadrate was $2.50 per direct labor-hour. The actual data pertaining tothe manufacturing overhead for the year are presentedbelow: |
| Actual production | 168,000 | units |
| Actual direct labor-hours | 410,000 | direct labor-hours |
| Actual variable manufacturing overhead | $322,000 | |
| Actual fixed manufacturing overhead | $572,000 |
Franklin'sfixed manufacturing overhead volume variance for the yearis:
| $25,000 unfavorable | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| $8,500 favorable | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| $313,500 favorable | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
$47,500 unfavorable
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Related questions
The standard cost card for the single product manufactured by Cutter, Inc., is given below:
| Inputs | (1) Standard Quantity or Hours | (2) Standard Price or Rate | Standard Cost (1) Ã (2) | ||||
| Direct materials | 4.2 yards | $ | 5.00 | per yard | $ | 21.00 | |
| Direct labor | 0.8 hours | $ | 15.00 | per hour | 12.00 | ||
| Variable overhead | 0.8 hours | $ | 1.50 | per hour | 1.20 | ||
| Fixed overhead | 0.8 hours | $ | 5.00 | per hour | 4.00 | ||
| Total standard cost per unit | $ | 38.20 | |||||
Manufacturing overhead is applied to production on the basis of standard direct labor-hours. During the year, the company worked 8,760 hours and manufactured 10,700 units of product. Selected data relating to the companyâs fixed manufacturing overhead cost for the year are shown below:
| Actual Fixed Overhead | Budgeted Fixed Overhead | Fixed Overhead Applied to Work in Process | |||||
| $42,000 | ? | ? hours à $? per hour = $? | |||||
| Budget variance, $? | Volume variance, $1,800 F | ||||||
Required:
1. What were the standard hours allowed for the yearâs production?
2. What was the amount of budgeted fixed overhead cost for the year?
3. What was the fixed overhead budget variance for the year? (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)
4. What denominator activity level did the company use in setting the predetermined overhead rate for the year?
âWonderful! Not only did our salespeople do a good job inmeeting the sales budget this year, but our production people did agood job in controlling costs as well,â said Kim Clark, presidentof Martell Company. âOur $42,400 overall manufacturing costvariance is only 4% of the $1,536,000 standard cost of productsmade during the year. Thatâs well within the 3% parameter set bymanagement for acceptable variances. It looks like everyone will bein line for a bonus this year.â |
| The company produces and sells a single product. The standardcost card for the product follows:
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