Billy Products operates a small plant in New Mexico that produces dog food in batches. The product sells for $3 per pound. Standard costs (Per batch) for 2015 are:
Standard direct labor cost = $15 per hour
Standard direct labor hours per batch = 8 hours
Standard price of material A = $0.60 per pound
Standard pounds of material A per batch = 800 pounds
Variable overhead based on DLH = $9 Per DLH
Fixed overhead cost per batch = $400
At the start of 2015, the company estimated monthly production and sales of 40 batches. The company estimated that all overhead costs were fixed and amounted to $16,000 per month. During the month of June 2015 (typically a somewhat slow month), 30 batches were produced (not an unusual level of production for this month. The following cost were incurred:
Direct labor costs were $4,800 for 300 hours.
24,500 pounds of material A costing $15,025 were purchased.
23,020 pounds of material A was used.
Variable overhead of $3,120 was incurred.
Fixed overhead of $15,500 was incurred.
*****
Questions:
1. Standard cost per batch and projected profit per batch?
2. Variances for direct material, direct labor, one-way overhead variance, variable overhead and fixed overhead.
3. Explain each variance.
Billy Products operates a small plant in New Mexico that produces dog food in batches. The product sells for $3 per pound. Standard costs (Per batch) for 2015 are:
Standard direct labor cost = $15 per hour
Standard direct labor hours per batch = 8 hours
Standard price of material A = $0.60 per pound
Standard pounds of material A per batch = 800 pounds
Variable overhead based on DLH = $9 Per DLH
Fixed overhead cost per batch = $400
At the start of 2015, the company estimated monthly production and sales of 40 batches. The company estimated that all overhead costs were fixed and amounted to $16,000 per month. During the month of June 2015 (typically a somewhat slow month), 30 batches were produced (not an unusual level of production for this month. The following cost were incurred:
Direct labor costs were $4,800 for 300 hours.
24,500 pounds of material A costing $15,025 were purchased.
23,020 pounds of material A was used.
Variable overhead of $3,120 was incurred.
Fixed overhead of $15,500 was incurred.
*****
Questions:
1. Standard cost per batch and projected profit per batch?
2. Variances for direct material, direct labor, one-way overhead variance, variable overhead and fixed overhead.
3. Explain each variance.
Related questions
| [The following information applies to the questions displayed below.] |
| Preble Company manufactures one product. Its variable manufacturing overhead is applied to production based on direct labor-hours and its standard cost card per unit is as follows: |
| Direct material: 6 pounds at $9.00 per pound | $ | 54.00 |
| Direct labor: 5 hours at $13.00 per hour | 65.00 | |
| Variable overhead: 5 hours at $3.00 per hour | 15.00 | |
| Total standard variable cost per unit | $ | 134.00 |
| The company also established the following cost formulas for its selling expenses: |
| Fixed Cost per Month | Variable Cost per Unit Sold | |||||
| Advertising | $ | 260,000 | ||||
| Sales salaries and commissions | $ | 120,000 | $ | 11.00 | ||
| Shipping expenses | $ | 4.00 | ||||
| The planning budget for March was based on producing and selling 20,000 units. However, during March the company actually produced and sold 25,000 units and incurred the following costs: |
| a. | Purchased 180,000 pounds of raw materials at a cost of $7.50 per pound. All of this material was used in production. |
| b. | Direct-laborers worked 115,000 hours at a rate of $14.00 per hour. |
| c. | Total variable manufacturing overhead for the month was $350,250. |
| d. | Total advertising, sales salaries and commissions, and shipping expenses were $267,000, $350,750, and $105,000, respectively. |
1. What raw materials cost would be included in the companyâs flexible budget for March?
2. What is the materials quantity variance for March? (Input the amount as a positive value. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.).)
3.What is the materials price variance for March? (Input the amount as a positive value. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.).)
4. If Preble had purchased 185,000 pounds of materials at $8 per pound and used 180,000 pounds in production, what would be the materials quantity variance for March? (Input the amount as a positive value. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance.).)
| Robinson Products uses standard costing. It allocates manufacturing overheadâ (both variable andâ fixed) to products on the basis of standard direct manufacturingâ labor-hours (DLH). | |||||||||||
| Robinson Products develops its manufacturing overhead rate from the current annual budget. The manufacturing overhead budget for 2014 is based on budgeted output of 696,000 units. | |||||||||||
| Requiring 3,480,000 DLH. | The company is able to schedule production uniformly thorughout the year. A total of 69,000 output units requiring 324,000 DLH | ||||||||||
| Manufacturing overheadâ (MOH) costs incurred for May amounted to 372,600 | |||||||||||
| Annual Manufacturing Overhead Budget 2014 | |||||||||||
| Per | Per DLH | Monthly | Actual MOH | ||||||||
| Total | Output | Input | MOH Budget | Costs for | |||||||
| Amount | Unit | Unit | May-14 | May-14 | |||||||
| Variable MOH | |||||||||||
| Indirect manufacturing labor | $1,044,000 | $1.50 | $0.30 | $87,000 | $87,000 | ||||||
| Supplies | 696,000 | 1 | 0.2 | 58,000 | 115,000 | ||||||
| Fixed MOH | |||||||||||
| Supervision | 522,000 | 0.75 | 0.15 | 43,500 | 43,000 | ||||||
| Utilities | 348,000 | 0.5 | 0.1 | 29,000 | 58,000 | ||||||
| Depreciation | 835,200 | 1.2 | 0.24 | 69,600 | 69,600 | ||||||
| Total | $3,445,200 | $4.95 | $0.99 | $287,100 | $372,600 | ||||||
| Budgeted hours per unit | |||||||||||
| Total MOH costs allocated | |||||||||||
| Actual input | Same budgeted | ||||||||||
| Actual costs | x | Flexible | Allocated | lump sum | |||||||
| incurred | budgeted rate | budget | overhead | Actual costs | regardless of | Flexible | Allocated | ||||
| Variable MOH | incurred | output level | budget | overhead | |||||||
| Fixed MOH | |||||||||||
| The variable manufacturing overhead spending variance is | |||||||||||
| 3 The fixed manufacturing overhead spending variance is | |||||||||||
| 4 The variable manufacturing overhead efficiency variance is | |||||||||||
| 5 The production-volume variance is | |||||||||||
1. Anderson Ltd. manufacture gearboxes for use in cars. At the start of the year, the management of Anderson Ltd. estimated that its costs would be:
| % of sales value | |
| Direct labour Direct material Variable production overhead Fixed production overhead Administration overhead | 8 50 8 12 5 |
This was based on the following:
80 employees
2000 hours worked by each employee
40 000 gearboxes manufactured in the year as budgeted production £200 unit selling price.
You have recently been employed by the company to establish a standard costing system. At the end of the year you were able to extract the following information:
labour costs £4.40/hour
32 000 units sold
£210/unit selling price
160 000 hours were worked
variable production overheads were £640 000
fixed production overheads were £810 000
administration costs were £350 000
raw material prices were 10% higher than expected
total expenditure on raw material was £3.696 M
there were no opening or closing stocks of raw materials.
(Budgeted) Costs
Unit cost
£
Direct labour 16.00
Direct materials 100.00
Variable overhead 16.00
Fixed overhead 24.00
156.00
Admin. Overhead 10.00
Total 166.00
Selling price 200
Standard profit (per unit) 34
Budgeted profit 136000
Sales price variance 320000
Sales quantity variance -1680000
Variable overheads
Standard cost =
Actual cost =
Expenditure variance =
Efficiency variance =
Fixed overheads
Expenditure variance =
Volume variance =
Admin overhead (treat as fixed)
Expenditure variance =
Volume variance =
I currently have the answers to Labour and Material Variances. I require help on Fixed , Variable and Admin Overheads?
