Eric Williams is a cost accountant and business analyst for Diamond Design Company (DDC), which manufactures expensive brass doorknobs. DDC uses two direct-cost categories: direct materials and direct manufacturing labor. Williams feels that manufacturing overhead is most closely related to material usage. Therefore, DDC allocates manufacturing overhead to production based upon pounds of materials used. At the beginning of 2017, DDC budgeted annual production of 420,000 doorknobs and adopted the fol- lowing standards for each doorknob: Input 0.3 lb. @ $10/lb. 1.2 hours @$17/hour Cost/Doorknob Direct materials (brass) $ 3.00 Direct manufacturing labor Manufacturing overhead: 20.40 $5/lb. x 0.3 lb. $15/lb. x 0.3 Ib. Variable 1.50 Fixed 4.50 Standard cost per doorknob $29.40 Actual results for April 2017 were as follows: Production Direct materials purchased Direct materials used Direct manufacturing labor Variable manufacturing overhead Fixed manufacturing overhead 29,000 doorknobs 12,400 lb. at $11/lb. 8,500 lbs. 29,200 hours for $671,600 $ 65,100 $158,000

Eric Williams is a cost accountant and business analyst for Diamond Design Company (DDC), which manufactures expensive brass doorknobs. DDC uses two direct-cost categories: direct materials and direct manufacturing labor. Williams feels that manufacturing overhead is most closely related to material usage. Therefore, DDC allocates manufacturing overhead to production based upon pounds of materials used. At the beginning of 2017, DDC budgeted annual production of 420,000 doorknobs and adopted the fol- lowing standards for each doorknob: Input 0.3 lb. @ $10/lb. 1.2 hours @$17/hour Cost/Doorknob Direct materials (brass) $ 3.00 Direct manufacturing labor Manufacturing overhead: 20.40 $5/lb. x 0.3 lb. $15/lb. x 0.3 Ib. Variable 1.50 Fixed 4.50 Standard cost per doorknob $29.40 Actual results for April 2017 were as follows: Production Direct materials purchased Direct materials used Direct manufacturing labor Variable manufacturing overhead Fixed manufacturing overhead 29,000 doorknobs 12,400 lb. at $11/lb. 8,500 lbs. 29,200 hours for $671,600 $ 65,100 $158,000

Name: For the month of April, compute the variances, indicating whether it
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Description: For the month of April, compute the variances, indicating whether it is favorable (F) or unfavorable (U):Q. Variable manufacturing overhead spending variance ? Eric Williams is a cost accountant andbusiness analyst for Diamond Design Company (DDC),

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter6: Activity-based, Variable, And Absorption Costing

Section: Chapter Questions

Problem 6PB: Box Springs. Inc., makes two sizes of box springs: queen and king. The direct material for the queen...

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The controller for Muir Companys Salem plant is analyzing overhead in order to determine appropriate drivers for use in flexible budgeting. She decided to concentrate on the past 12 months since that time period was one in which there was little important change in technology, product lines, and so on. Data on overhead costs, number of machine hours, number of setups, and number of purchase orders are in the following table. Required: 1. Calculate an overhead rate based on machine hours using the total overhead cost and total machine hours. (Round the overhead rate to the nearest cent and predicted overhead to the nearest dollar.) Use this rate to predict overhead for each of the 12 months. 2. Run a regression equation using only machine hours as the independent variable. Prepare a flexible budget for overhead for the 12 months using the results of this regression equation. (Round the intercept and x-coefficient to the nearest cent and predicted overhead to the nearest dollar.) Is this flexible budget better than the budget in Requirement 1? Why or why not?
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