Overhead information for Cran-Mar Company for October follows: Total factory overhead cost incurred $ 16,700 Budgeted fixed factory overhead cost $ 4,902 Total standard overhead rate per machine hour (MH) $ 4.95 Standard variable factory overhead rate per MH $ 3.50 Standard MHs allowed for the units manufactured 4,850 Required: 1. What is the standard fixed factory overhead rate per machine hour (MH)? 2. What is the denominator activity level that was used to establish the fixed factory overhead application rate? 3. Two-way analysis (breakdown) of the total factory overhead cost variance: Using panel B in Exhibit 15.7 as a guide, calculate the following factory overhead cost variances for October and indicate whether each variance is favorable (F) or unfavorable (U). a. Total flexible-budget variance. b. Production volume variance. c. Total overhead cost variance.
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
| Total |
$ | 16,700 | |
| Budgeted fixed factory overhead cost | $ | 4,902 | |
| Total standard overhead rate per machine hour (MH) | $ | 4.95 | |
| Standard variable factory overhead rate per MH | $ | 3.50 | |
| Standard MHs allowed for the units manufactured | 4,850 | ||
Required:
1. What is the standard fixed factory overhead rate per machine hour (MH)?
2. What is the denominator activity level that was used to establish the fixed factory overhead application rate?
3. Two-way analysis (breakdown) of the total factory overhead cost variance: Using panel B in Exhibit 15.7 as a guide, calculate the following factory overhead cost variances for October and indicate whether each variance is favorable (F) or unfavorable (U).
a. Total flexible-
b. Production volume variance.
c. Total overhead cost variance.
4. Confirm your answer to 3b above by using the model at the bottom of Exhibit 15.6 to calculate the production volume variance and indicate whether the variance is favorable (F) or unfavorable (U).
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