Chapter 23: Q20RQ (page 1305)
Question:What is a standard cost income statement?
Answer
The standard cost income statement focuses on variances for the management
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Computing standard overhead allocation rates
The following information relates to Morgan, Inc.’s overhead costs for the month:
Static budget variable overhead | \(7,800 |
Static budget fixed overhead | \)3,900 |
Static budget direct labor hours | 1,300 hours |
Static budget number of units | 5,200 units |
Morgan allocates manufacturing overhead to production based on standard direct labor hours. Compute the standard variable overhead allocation rate and the standard fixed overhead allocation rate.
Question: List the variable overhead variances, and briefly describe each
Question:List the direct labor variances, and briefly describe each.
Question:Give the general formulas for determining cost and efficiency variances.
Computing overhead variances
Refer to the Morgan, Inc. data in Short Exercise S239. Last month, Morgan reported the following actual results: actual variable overhead, \(10,800; actual fixed overhead, \)2,770; actual production of 7,000 units at 0.20 direct labor hours per unit. The standard direct labor time is 0.25 direct labor hours per unit (1,300 static direct labor hours / 5,200 static units).
Requirements
1. Compute the overhead variances for the month: variable overhead cost variance, variable overhead efficiency variance, fixed overhead cost variance, and fixed overhead volume variance.
2. Explain why the variances are favorable or unfavorable.
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