Question

In: Accounting

Alexandria Company uses a standard costing system. At the beginning of the 2020 financial year Alexandria...

Alexandria Company uses a standard costing system. At the beginning of the 2020 financial year Alexandria adopted the following standards:

Inputs

Total

Direct materials

3 kg @ $2.50 per kg

$7.50

Direct labour

5 hrs @ $7.50 per hr

37.50

Factory overhead:

Variable

$3.00 per direct labour hour

15.00

Fixed

$4.00 per direct labour hour

20.00

Standard cost per unit

$80.00

Alexandria’s July 2019 budget was based on the denominator volume of 40,000 direct labour hours. Alexandria’s actual July production was 7,800 units. The records for July indicated the following:

Direct materials purchased

25,000kg @ $2.60/kg

Direct materials used

23,100kg

Direct labour

40,100 hours at $7.30/hour

Total actual factory overhead:

Variable $125,000

Fixed $175,000

$300,000

The company’s policy is to record materials variances at the time materials are purchased.

Required

  1. Compute all possible variances from the case facts for the month of July. Label each variance calculated and indicate whether each variance is favourable (F) or unfavourable (U).
  2. Maggie is rushing to prepare for her ACFI2003 final exam. She cannot understand why variable overhead has an efficiency variance, but fixed overhead does not. She is puzzled why fixed overhead has a volume variance and variable overhead does not. She reasoned that, “After all, overhead is overhead. So fixed and variable overhead should have the same type of variances”. Do you agree with Maggie? Explain in full why you agree or disagree

Solutions

Expert Solution


Related Solutions

Alexandria Company uses a standard costing system. At the beginning of the 2020 financial year Alexandria...
Alexandria Company uses a standard costing system. At the beginning of the 2020 financial year Alexandria adopted the following standards: Inputs Total Direct materials 3 kg @ $2.50 per kg $7.50 Direct labour 5 hrs @ $7.50 per hr 37.50 Factory overhead: Variable $3.00 per direct labour hour 15.00 Fixed $4.00 per direct labour hour 20.00 Standard cost per unit $80.00 Alexandria’s July 2019 budget was based on the denominator volume of 40,000 direct labour hours. Alexandria’s actual July production...
Firm A uses a process-costing system. For September 2020, the company had the following activities: Beginning...
Firm A uses a process-costing system. For September 2020, the company had the following activities: Beginning work-in-process inventory 7,000 units       Units placed in production, current 23,000 units       Good units completed   25,000 units       Ending work-in-process inventory 2,000 units       Direct material costs, beginning $3,000       Conversion costs, beginning $2,000       Direct material costs, current $30,000       Conversion costs, current    $10,000 Direct materials are placed into production at the beginning of the process. Beginning WIP is 100% complete as to direct materials and 30% complete as...
Sultan Company uses an activity-based costing system. At the beginning of the year, the company made...
Sultan Company uses an activity-based costing system. At the beginning of the year, the company made the following estimates of cost and activity for its five activity cost pools: Activity Cost Pool Activity Measure Expected Overhead Cost Expected Activity Labor-related Direct labor-hours $ 174,000 34,800 DLHs Purchase orders Number of orders $ 7,200 240 orders Parts management Number of part types $ 66,500 95 part types Board etching Number of boards $ 64,800 1,620 boards General factory Machine-hours $ 115,200...
Sultan Company uses an activity-based costing system. At the beginning of the year, the company made...
Sultan Company uses an activity-based costing system. At the beginning of the year, the company made the following estimates of cost and activity for its five activity cost pools: Activity Cost Pool Activity Measure Expected Overhead Cost Expected Activity Labor-related Direct labor-hours $ 311,500 44,500 DLHs Purchase orders Number of orders $ 8,840 221 orders Parts management Number of part types $ 71,280 99 part types Board etching Number of boards $ 63,700 1,820 boards General factory Machine-hours $ 148,000...
Sultan Company uses an activity-based costing system. At the beginning of the year, the company made...
Sultan Company uses an activity-based costing system. At the beginning of the year, the company made the following estimates of cost and activity for its five activity cost pools: Activity Cost Pool Activity Measure Expected Overhead Cost Expected Activity Labor-related Direct labor-hours $ 317,600 39,700 DLHs Purchase orders Number of orders $ 9,900 220 orders Parts management Number of part types $ 67,890 93 part types Board etching Number of boards $ 76,000 1,900 boards General factory Machine-hours $ 237,600...
Sultan Company uses an activity-based costing system. At the beginning of the year, the company made...
Sultan Company uses an activity-based costing system. At the beginning of the year, the company made the following estimates of cost and activity for its five activity cost pools: Activity Cost Pool Activity Measure Expected Overhead Cost Expected Activity Labor-related Direct labor-hours $ 270,900 30,100 DLHs Purchase orders Number of orders $ 11,745 261 orders Parts management Number of part types $ 78,570 97 part types Board etching Number of boards $ 72,400 1,810 boards General factory Machine-hours $ 212,400...
Sultan Company uses an activity-based costing system. At the beginning of the year, the company made...
Sultan Company uses an activity-based costing system. At the beginning of the year, the company made the following estimates of cost and activity for its five activity cost pools: Activity Cost Pool Activity Measure Expected Overhead Cost Expected Activity Labor-related Direct labor-hours $ 165,200 41,300 DLHs Purchase orders Number of orders $ 13,020 217 orders Parts management Number of part types $ 82,840 109 part types Board etching Number of boards $ 92,400 1,680 boards General factory Machine-hours $ 128,100...
Sultan Company uses an activity-based costing system.         At the beginning of the year, the company made...
Sultan Company uses an activity-based costing system.         At the beginning of the year, the company made the following estimates of cost and activity for its five activity cost pools:       Activity Cost Pool   Activity Measure Expected Overhead Cost        Expected         Activity   Labor-related   Direct labor-hours $ 380,000    38,000 DLHs   Purchase orders   Number of orders $ 11,935    217 orders   Parts management   Number of part types $ 79,500    106 part types   Board etching   Number of boards $ 93,000    1,860 boards...
Landen Corporation uses a job-order costing system. At the beginning of the year, the company made...
Landen Corporation uses a job-order costing system. At the beginning of the year, the company made the following estimates: Direct labor-hours required to support estimated production 140,000 Machine-hours required to support estimated production 70,000 Fixed manufacturing overhead cost $ 784,000 Variable manufacturing overhead cost per direct labor-hour $ 2.00 Variable manufacturing overhead cost per machine-hour $ 4.00 During the year, Job 550 was started and completed. The following information is available with respect to this job: Direct materials $ 175...
Landen Corporation uses a job-order costing system. At the beginning of the year, the company made...
Landen Corporation uses a job-order costing system. At the beginning of the year, the company made the following estimates Direct labor-hours required to support estimated production 80,000 Machine-hours required to support estimated production 40,000 Fixed manufacturing overhead cost $ 240,000 Variable manufacturing overhead cost per direct labor-hour $ 1.80 Variable manufacturing overhead cost per machine-hour $ 3.60 During the year, Job 550 was started and completed. The following information is available with respect to this job: Direct materials $ 207...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT