At the end of the year, the plant reported the following actual results: output of 1,500,000 using 760,000 labor-hours in total, at a cost of $2,700,000 in variable overhead and $1,850,000 in fixed overhead.
- A. Compute the budgeted fixed cost per labor-hour for the fixed overhead.
Required
- B. Compute the variable overhead spending variance and the variable overhead efficiency variance.
- C. Compute the fixed overhead spending and volume variances.
- D. Compute the budgeted fixed cost per labor-hour for the fixed overhead if Tom Saban had estimated production more realistically at the expected sales level of 1,500,000 units.
- E. Summarize the fixed overhead variance based on both the projected level of production of 1,200,000 units and 1,500,000 units.
- F. Did Tom Saban’s attempt to make his friend, the plant manager, look better work? Why or why not?
- G. What do you think of Tom Saban’s behavior overall?
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EBK HORNGREN'S COST ACCOUNTING
- Carpenter Company uses standard costing. The company has a manufacturing plant in Georgia. Standard labor-hours per unit are 0.50, and the variable overhead rate for the Georgia plant is $3.50 per direct labor-hour. Fixed overhead for the Georgia plant is budgeted at $1,800,000 for the year. Firm management has always used variance analysis as a performance measure for the plant. Tom Saban has just been hired as a new controller for Carpenter Company. Tom is good friends with the Georgia plant manager and wants him to get a favorable review. Tom decides to underestimate production, and budgets annual output of 1,200,000 units. His explanation for this is that the economy is slowing and sales are likely to decrease. At the end of the year, the plant reported the following actual results: output of 1,500,000 using 760,000 labor-hours in total, at a cost of $2,700,000 in variable overhead and $1,850,000 in fixed overhead. Q. Compute the budgeted fixed cost per labor-hour for the fixed…arrow_forwardCarpenter Company uses standard costing. The company has a manufacturing plant in Georgia. Standard labor-hours per unit are 0.50, and the variable overhead rate for the Georgia plant is $3.50 per direct labor-hour. Fixed overhead for the Georgia plant is budgeted at $1,800,000 for the year. Firm management has always used variance analysis as a performance measure for the plant. Tom Saban has just been hired as a new controller for Carpenter Company. Tom is good friends with the Georgia plant manager and wants him to get a favorable review. Tom decides to underestimate production, and budgets annual output of 1,200,000 units. His explanation for this is that the economy is slowing and sales are likely to decrease. At the end of the year, the plant reported the following actual results: output of 1,500,000 using 760,000 labor-hours in total, at a cost of $2,700,000 in variable overhead and $1,850,000 in fixed overhead. Q. Compute the variable overhead spending variance and the variable…arrow_forwardCarpenter Company uses standard costing. The company has a manufacturing plant in Georgia. Standard labor-hours per unit are 0.50, and the variable overhead rate for the Georgia plant is $3.50 per direct labor-hour. Fixed overhead for the Georgia plant is budgeted at $1,800,000 for the year. Firm management has always used variance analysis as a performance measure for the plant. Tom Saban has just been hired as a new controller for Carpenter Company. Tom is good friends with the Georgia plant manager and wants him to get a favorable review. Tom decides to underestimate production, and budgets annual output of 1,200,000 units. His explanation for this is that the economy is slowing and sales are likely to decrease. At the end of the year, the plant reported the following actual results: output of 1,500,000 using 760,000 labor-hours in total, at a cost of $2,700,000 in variable overhead and $1,850,000 in fixed overhead. Q.Did Tom Saban’s attempt to make his friend, the plant manager,…arrow_forward
- Carpenter Company uses standard costing. The company has a manufacturing plant in Georgia. Standard labor-hours per unit are 0.50, and the variable overhead rate for the Georgia plant is $3.50 per direct labor-hour. Fixed overhead for the Georgia plant is budgeted at $1,800,000 for the year. Firm management has always used variance analysis as a performance measure for the plant. Tom Saban has just been hired as a new controller for Carpenter Company. Tom is good friends with the Georgia plant manager and wants him to get a favorable review. Tom decides to underestimate production, and budgets annual output of 1,200,000 units. His explanation for this is that the economy is slowing and sales are likely to decrease. At the end of the year, the plant reported the following actual results: output of 1,500,000 using 760,000 labor-hours in total, at a cost of $2,700,000 in variable overhead and $1,850,000 in fixed overhead. Q.Summarize the fixed overhead variance based on both the projected…arrow_forwardOverhead variances, ethics. Carpenter Company uses standard costing. The company has a manufacturing plant in Georgia. Standard labor-hours per unit are 0.50, and the variable overhead rate for the Georgia plant is $3.50 per direct labor-hour. Fixed overhead for the Georgia plant is budgeted at $1,800,000 for the year. Firm management has always used variance analysis as a performance measure for the plant. Tom Saban has just been hired as a new controller for Carpenter Company. Tom is good friends with the Georgia plant manager and wants him to get a favorable review. Tom decides to underestimate production, and budgets annual output of 1,200,000 units. His explanation for this is that the economy is slowing and sales are likely to decrease. At the end of the year, the plant reported the following actual results: output of 1,500,000 using 760,000 labor-hours in total, at a cost of $2,700,000 in variable overhead and $1,850,000 in fixed overhead.arrow_forwardCarpenter Company uses standard costing. The company has a manufacturing plant in Georgia. Standard labour-hours per unit are 0.50, and the variable overhead rate for the Georgia plant is $3.50 per direct labour-hour. Fixed overhead for the Georgia plant is budgeted at $1,800,000 for the year. Firm management has always used variance analysis as a performance measure for the plant. Tom Saban has just been hired as a new controller for Carpenter Company. Tom is good friends with the Georgia plant manager and wants him to get a favourable review. Tom decides to underestimate production, and budgets annual output of 1,200,000 units. His explanation for this is that the economy is slowing and sales are likely to decrease. At the end of the year, the plant reported the following actual results: output of 1,500,000 using 760,000 labour-hours in total, at a cost of $2,700,000 in variable overhead and $1,850,000 in fixed overhead. Briefly answer the following questions (and then respond to at…arrow_forward
- Chic Design is a manufacturer of large flower pots for urban settings. The company has these standards: (Click the icon to view the standards.) Last month, the company reported the following actual results for the production of 1,800 flower pots: (Click the icon to view the actual results.) (Click the icon to view related variances.) Assume the company uses a standard cost accounting system. Date Data table Direct materials (resin) Direct labor..... Accounts Requirement 1. Record Watermate's direct material and direct labor journal entries. (Record debits first, then credits. Exclude explanations from any journal entries. Abbreviations used: DM = Direct materials, DL = Direct labor) Let's start by recording the entry for the purchase of raw materials. Journal Entry Standard variable manufacturing overhead rate Budgeted fixed manufacturing overhead Standard fixed MOH rate Print Debit Done Credit 12 pounds per pot at a cost of $5.00 per pound 2.0 hours at a cost of $23.00 per hour .…arrow_forwardKrueger Corporation in Washington, D.C., U.S., recently implemented a standard cost system. The company's cost accountant has gathered the following information needed to perform a variance analysis at the end of the month: Standard Cost Information+ Direct materials Quantity allowed per unit Direct labor rate.. Hours allowed per unit. Fixed overhead budgeted Normal level of production. Variable overhead application rate Fixed overhead application rate ($12,000 _ 1,200 units)... 10.00 per unit- Total overhead application rate. $5 per pound 100 pounds per unit $20.00 per hour ..2 hours per unit- $12,000 per month 1,200 units+ $2.00 per unit $12.00 per unit Actual Cost Information+ Cost of materials purchased and used. Pounds of materials purchased and used Cost of direct labor. Hours of direct labor Cost of variable overhead Cost of fixed overhead. Volume of production. $468,000- ..104,000 pounds- $46,480- ..2,240 hours- $2,352- $12,850- 1,000 units- Instructions Compute the direct…arrow_forwardOverhead variances, ethics. Hartmann Company uses standard costing. The company has two manufacturing plants, one in Georgia and the other in Alabama. For the Georgia plant, Hartmann has budgeted annual output of 2,000,000 units. Standard labor-hours per unit are 0.50, and the variable overhead rate for the Georgia plant is $3.30 per direct labor-hour. Fixed overhead for the Georgia plant is budgeted at $2,400,000 for the year. For the Alabama plant, Hartmann has budgeted annual output of 2,100,000 units with standard laborhours also 0.50 per unit. However, the variable overhead rate for the Alabama plant is $3.10 per hour, and the budgeted fixed overhead for the year is only $2,205,000. Firm management has always used variance analysis as a performance measure for the two plants and has compared the results of the two plants. Tom Saban has just been hired as a new controller for Hartmann. Tom is good friends with the Alabama plant manager and wants him to get a favorable review. Tom…arrow_forward
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- Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning