In: Accounting
The Brown Manufacturing Company's costing system has two direct-cost categories: direct materials and direct manufacturing labor. Manufacturing overhead (both variable and fixed) is allocated to products on the basis of standard direct manufacturing labor hours (DLH). At the beginning of
2014 Brown adopted the following standards for its manufacturing costs:
Direct materials |
3 lbs. at $4 per lb. |
$12.00 |
||
Direct manufacturing labor |
4 hrs. at $20 per hr. |
80.00 |
||
Manufacturing overhead: |
||||
Variable |
$6 per DLH |
24.00 |
||
Fixed |
$7 per DLH |
28.00 |
||
Standard manufacturing cost per output unit |
$144.00 |
The denominator level for total manufacturing overhead per month in
2014 is 37,000 direct manufacturing labor-hours
Brown's flexible budget for January 2014
was based on this denominator level. The records for January indicated the following:
Save Accounting Table... |
+ |
||
Copy to Clipboard... |
+ |
Direct materials purchased |
26,300 lb. at $3.80 per lb. |
Direct materials used |
23,300 lb. |
Direct manufacturing labor |
28,400 hrs. at $19.60 per hr. |
Total actual manufacturing overhead (variable and fixed) |
$500,000 |
Actual production |
7,600 output units |
Next, complete the table for variable overhead.
Actual Input Qty. |
||||
Actual Costs |
x |
Flexible |
Allocated |
|
Incurred |
Budgeted Price |
Budget |
Overhead |
|
Variable Manuf. OH |
Actual Cost Incurred | Actual Input Qty. X Budgeted Rate | Flexible Budget (Budgeted Input Qty Allowed for Actual Output X Budgted Rate) | Allocated (Budgeted Input Qty Allowed for Actual Ouput X Budgeted rate) | |
Variable Manufact. Overhead | No Given | 28,400 Hrs X $6 | 30,400 Hrs X $6 per Hrs | 30,400 Hrs X $6 per Hrs |
$ 170,400.00 | $ 182,400.00 | $ 182,400.00 | ||
Efficiency Variance = $12,000 (U) | ||||
Never A Variance |