Question

Bluecap Co. uses a standard cost system and flexible budgets for control purposes. The following budgeted information pertains to 2016:

Denominator volume-number of units	8,000
Denominator volume-percent of capacity	80%
Denominator volume-standard direct labor hours	24,000
Budgeted variable factory overhead cost at the denominator volume	$103,200
Total standard factory overhead rate per direct labor hour	$15.10

During 2016, Bluecap worked 28,000 direct labor hours and manufactured 9,600 units. The actual factory overhead was $14,000 greater than the flexible budget amount for the units produced, of which $6,000 was due to fixed factory overhead. In preparing a budget for 2017 Jensen decided to raise the level of operation to 90% of capacity, to manufacture 9,000 units at a budgeted total of 27,000 direct labor hours.

a. Compute variable overhead variances for 2016:

b. Compute fixed overhead variances for 2016:

c. Under the assumption that the total budgeted fixed overhead for 2017 is the same as it was for 2016, what is the standard fixed overhead application rate per direct labor hour for Bluecap Co. for 2017?

d. Must be done in excel and show all work.

Answer 1