Deck 17: Standard Costing and Variance Analysis 1

Question 1

An unfavourable materials usage variance may be caused by

A) excessive rework.
B) a special price offered by suppliers.
C) use of experienced workers.
D) none of the above.

Answer 1

A

Question 2

Variances indicate

A) the cause of the variance.
B) who is responsible for the variance.
C) that actual performance is not going according to plan.
D) when the variance should be investigated.

Answer 2

C

Question 3

For better control of direct material prices, when should direct material price variance be recognized?

A) when material is purchased
B) when material is issued from the storeroom
C) when material is put into production
D) when production is completed

Answer 3

A

Question 4

To determine the unit standard cost for a particular input, a company must decide how much

A) input should be used per unit of output and how much should be paid for the quantity of the input to be used.
B) input should be used per unit of output and how much output should be produced.
C) output should be produced and how much should be paid for each unit produced.
D) should be paid for the quantity of the input to be used and how much input should be purchased.

Question 5

An unfavourable materials price variance with a favourable materials usage variance would most likely be the result of

A) machines breaking down.
B) problems with labour efficiency.
C) purchase of high quality materials.
D) problems with labour rates.

Question 6

The purchase of inferior direct materials at a lower price might affect which of the following variances?

A) materials price variance
B) materials usage variance
C) labour efficiency variance
D) all of the above

Question 7

A 5 per cent wage increase for all factory employees would affect which of the following variances?

A) materials price variance
B) labour rate variance
C) labour efficiency variance
D) variable manufacturing overhead efficiency variance

Question 8

The two variances for variable overhead are

A) spending and efficiency variances.
B) spending and budget variances.
C) budget and volume variances.
D) budget and efficiency variances.

Question 9

An unfavourable materials price variance may be caused by

A) excessive rework.
B) a special price offered by suppliers.
C) use of experienced workers.
D) none of the above.

Question 10

Efficiency variances focus on the difference between

A) actual quantity used and standard quantity allowed for estimated activity.
B) actual quantity used and standard quantity allowed for units actually produced.
C) quantity allowed for estimated production and standard quantity allowed for units actually produced.
D) none of the above.

Question 11

A favourable materials usage variance may be caused by

A) excessive rework.
B) a special price offered by suppliers.
C) use of experienced workers.
D) none of the above.

Question 12

The labour rate variance is calculated as

A) (Actual hourly wage rate - Standard hourly wage rate) *Actual direct labour hours used.
B) (Actual hourly wage rate - Standard hourly wage rate) * Standard direct labour hours that should have been used.
C) (Actual direct labour hours used - Standard direct labour hours that should have been used) * Actual hourly wage rate.
D) (Actual direct labour hours used - Standard direct labour hours that should have been used) *Standard hourly wage rate.

Question 13

Standard cost systems can enhance operational control through the use of

A) price variances, which indicate the need for enhanced spending control.
B) efficiency variances, which indicate the need for corrective action.
C) standard costs, which indicate the desired cost of a unit of input.
D) actual costs, which indicate the price received for units sold.

Question 14

Who is responsible for unfavourable labour efficiency variances caused by poor quality materials?

A) warehouse manager
B) production manager
C) purchasing manager
D) engineering manager

Question 15

Labour efficiency variances may be caused by

A) the use of highly skilled workers.
B) frequent machinery breakdowns.
C) the use of marginally skilled workers.
D) all of the above.

Question 16

Labour rate variances can be the result of

A) the use of an average wage rate.
B) unexpected overtime.
C) seniority mix changes.
D) all of the above.

Question 17

Price variances focus on the difference between

A) actual price and standard price for actual quantity allowed for units actually produced.
B) actual price and standard price for standard quantity allowed for units actually produced.
C) actual price and standard price for actual quantity allowed for estimated activity.
D) none of the above.

Question 18

A favourable materials price variance may be caused by

A) excessive rework.
B) a special price offered by suppliers.
C) use of experienced workers.
D) none of the above.

Question 19

Using more highly skilled direct labourers might affect which of the following variances?

A) materials usage variance
B) labour efficiency variance
C) variable manufacturing overhead efficiency variance
D) all of the above

Question 20

Which of the following is information that would be included in the standard cost card (sheet)?

A) quantity and price of direct materials for each unit of output
B) retail price of the product charged to the customers
C) delivery cost per unit of product
D) all of the above

Question 21

Figure 17-2
Rax Company has developed the following standards for one of its products: The following activities occurred during the month of October: The company records materials price variances at the time of purchase.
Refer to Figure 17-2. Rax's labour rate variance would be

A) £4,300 favourable.
B) £4,300 unfavourable.
C) £2,500 favourable.
D) £2,500 unfavourable.

Question 22

During May, 6,000 pounds of raw materials were purchased at a cost of £2.60 per pound. If there was a favourable materials price variance of £900 for December, the standard cost per pound must be

A) £2.75.
B) £2.60.
C) £2.45.
D) none of the above.

Question 23

Figure 17-2
Rax Company has developed the following standards for one of its products: The following activities occurred during the month of October: The company records materials price variances at the time of purchase.
Refer to Figure 17-2. Rax's materials usage variance would be

A) £8,400 unfavourable.
B) £8,400 favourable.
C) £5,600 unfavourable.
D) £5,600 favourable.

Question 24

Figure 17-1
Max Company has developed the following standards for one of its products:
Direct materials
15 pounds *£16 per pound
Direct labour
4 hours*£24 per hour
Variable overhead
4 hours * £14 per hour
The following activities occurred during the month of October:
Materials purchased
10,000 pounds costing £170,000
Materials used
7,200 pounds
Units produced
500 units
Direct labour
2,300 hours at £23.60 per hour
Actual variable overhead
£30,000
The company records materials price variances at the time of purchase.

-Refer to Figure 17-1. Max's labour rate variance would be

A) £920 unfavourable.
B) £920 favourable.
C) £800 unfavourable.
D) £800 favourable.

Question 25

Figure 17-1
Max Company has developed the following standards for one of its products:
Direct materials
15 pounds *£16 per pound
Direct labour
4 hours*£24 per hour
Variable overhead
4 hours * £14 per hour
The following activities occurred during the month of October:
Materials purchased
10,000 pounds costing £170,000
Materials used
7,200 pounds
Units produced
500 units
Direct labour
2,300 hours at £23.60 per hour
Actual variable overhead
£30,000
The company records materials price variances at the time of purchase.

-Refer to Figure 17-1. Max's materials price variance would be

A) £50,000 favourable.
B) £50,000 unfavourable.
C) £10,000 unfavourable.
D) £10,000 favourable.

Question 26

Figure 17-1
Max Company has developed the following standards for one of its products:
Direct materials
15 pounds *£16 per pound
Direct labour
4 hours*£24 per hour
Variable overhead
4 hours * £14 per hour
The following activities occurred during the month of October:
Materials purchased
10,000 pounds costing £170,000
Materials used
7,200 pounds
Units produced
500 units
Direct labour
2,300 hours at £23.60 per hour
Actual variable overhead
£30,000
The company records materials price variances at the time of purchase.

-Refer to Figure 17-1. Max's labour efficiency variance would be

A) £7,200 unfavourable.
B) £7,200 favourable.
C) £6,280 unfavourable.
D) £6,280 favourable.

Question 27

The volume variance provides information to management about

A) utilization of plant facilities.
B) cost control.
C) performance for evaluation purposes.
D) all of the above.

Question 28

The standard fixed overhead rate is calculated as

A) Actual fixed overhead/Actual activity.
B) Budgeted fixed overhead/Budgeted activity.
C) Budgeted fixed overhead/Actual activity.
D) Budgeted overhead/Budgeted activity.

Question 29

Figure 17-2
Rax Company has developed the following standards for one of its products: The following activities occurred during the month of October: The company records materials price variances at the time of purchase.
Refer to Figure 17-2. Rax's materials price variance would be

A) £4,000 unfavourable.
B) £4,000 favourable.
C) £1,600 unfavourable.
D) £1,600 favourable.

Question 30

During December, 6,000 pounds of raw materials were purchased at a cost of £16 per pound. If there was an unfavourable materials price variance of £6,000 for December, the standard cost per pound must be

A) £17.
B) £16.
C) £15.
D) none of the above.

Question 31

Figure 17-1
Max Company has developed the following standards for one of its products:
Direct materials
15 pounds *£16 per pound
Direct labour
4 hours*£24 per hour
Variable overhead
4 hours * £14 per hour
The following activities occurred during the month of October:
Materials purchased
10,000 pounds costing £170,000
Materials used
7,200 pounds
Units produced
500 units
Direct labour
2,300 hours at £23.60 per hour
Actual variable overhead
£30,000
The company records materials price variances at the time of purchase.

-Refer to Figure 17-1. Max's variable standard cost per unit would be

A) £392.
B) £336.
C) £296.
D) £152.

Question 32

Figure 17-2
Rax Company has developed the following standards for one of its products: The following activities occurred during the month of October: The company records materials price variances at the time of purchase.
Refer to Figure 17-2. Rax's variable standard cost per unit would be

A) £78.
B) £192.
C) £246.
D) £222.

Question 33

During September, 40,000 units of product were produced. The standard quantity of material allowed per unit was four pounds at a standard cost of £6.00 per pound. If there was a favourable materials usage variance of £30,000 for April, the actual quantity of materials used must be

A) 41,250 pounds.
B) 38,750 pounds.
C) 165,000 pounds.
D) 155,000 pounds.

Question 34

The two variances for fixed overhead are

A) spending and efficiency variances.
B) efficiency and volume variances.
C) spending and volume variances.
D) budget and efficiency variances.

Question 35

During October, 16,000 direct labour hours were worked at a standard cost of £6 per hour. If the labour rate variance for October was £4,000 unfavourable, the actual cost per labour hour must be

A) £6.25.
B) £6.00.
C) £5.75.
D) none of the above.

Question 36

If variable overhead is applied based on direct labour hours and there is an unfavourable labour efficiency variance,

A) the materials usage variance will be unfavourable.
B) the labour rate variance will be favourable.
C) the variable overhead efficiency variance will be unfavourable.
D) the variable overhead spending variance will be unfavourable.

Question 37

Figure 17-2
Rax Company has developed the following standards for one of its products: The following activities occurred during the month of October: The company records materials price variances at the time of purchase.
Refer to Figure 17-2. Rax's labour efficiency variance would be

A) £4,300 unfavourable.
B) £4,300 favourable.
C) £1,800 unfavourable.
D) £1,800 favourable.

Question 38

Figure 17-1
Max Company has developed the following standards for one of its products:
Direct materials
15 pounds *£16 per pound
Direct labour
4 hours*£24 per hour
Variable overhead
4 hours * £14 per hour
The following activities occurred during the month of October:
Materials purchased
10,000 pounds costing £170,000
Materials used
7,200 pounds
Units produced
500 units
Direct labour
2,300 hours at £23.60 per hour
Actual variable overhead
£30,000
The company records materials price variances at the time of purchase.

-Refer to Figure 17-1. Max's materials usage variance would be

A) £40,000 unfavourable.
B) £40,000 favourable.
C) £4,800 unfavourable.
D) £4,800 favourable.

Question 39

During April, 80,000 units of product were produced. The standard quantity of material allowed per unit was two pounds at a standard cost of £5 per pound. If there was a favourable materials usage variance of £40,000 for April, the actual quantity of materials used must have been

A) 168,000 pounds.
B) 152,000 pounds.
C) 84,000 pounds.
D) 76,000 pounds.

Question 40

If a company was concerned with controlling expenditures on overhead items, which variance would be useful?

A) fixed overhead volume variance
B) variable overhead efficiency variance
C) variable overhead spending variance
D) both b and c

Question 41

Fixed overhead was budgeted at £500,000 and 25,000 direct labour hours were budgeted. If the fixed overhead volume variance was £12,000 favourable and the fixed overhead spending variance was £16,000 unfavourable, fixed overhead applied must be

A) £516,000.
B) £512,000.
C) £504,000.
D) £528,000.

Question 42

Figure 17-6
Refer to Figure 17-6. The fixed overhead volume variance would be

A) £2,500 unfavourable.
B) £2,500 favourable.
C) £1,000 unfavourable.
D) £1,000 favourable.

Question 43

Figure 17-6
Refer to Figure 17-6. The fixed overhead spending variance would be

A) £2,500 unfavourable.
B) £2,500 favourable.
C) £1,000 unfavourable.
D) £1,000 favourable.

Question 44

Figure 17-4
Shannon Ltd.'s standard cost card contained the following information:
Direct labour: 1.25 hours * £8.00 per hour = £10.00
Shannon planned to make 12,000 units. Shannon actually made 10,000 units using 13,000 hours.

-Refer to Figure 17-4. If Shannon's actual labour cost was £136,500, Shannon's labour rate variance was

A) £32,500 unfavourable.
B) £32,500 favourable.
C) £6,500 unfavourable.
D) £6,500 favourable.

Question 45

If actual fixed overhead was £120,000 and there was a £2,600 favourable spending variance and a £2,000 unfavourable volume variance, budgeted fixed overhead must have been

A) £124,600.
B) £122,000.
C) £120,000.
D) £122,600.

Question 46

Figure 17-5
Ebola Company has developed the following standards for one of its products: The following activities occurred during the month of October: The company records materials price variances at the time of purchase.
Refer to Figure 17-5. Ebola's materials usage variance would be

A) £120,000 favourable.
B) £120,000 unfavourable.
C) £80,000 unfavourable.
D) £80,000 favourable.

Question 47

Figure 17-6
Refer to Figure 17-6. The variable overhead spending variance would be

A) £2,000 favourable.
B) £1,200 favourable.
C) £400 favourable.
D) £200 favourable.

Question 48

Figure 17-5
Ebola Company has developed the following standards for one of its products: The following activities occurred during the month of October: The company records materials price variances at the time of purchase.
Refer to Figure 17-5. Ebola's labour efficiency variance would be

A) £18,000 favourable.
B) £18,000 unfavourable.
C) £17,700 unfavourable.
D) £17,700 favourable.

Question 49

Figure 17-4
Shannon Ltd.'s standard cost card contained the following information:
Direct labour: 1.25 hours * £8.00 per hour = £10.00
Shannon planned to make 12,000 units. Shannon actually made 10,000 units using 13,000 hours.

-Refer to Figure 17-4. Shannon's labour efficiency variance was

A) £4,625 unfavourable.
B) £4,000 unfavourable.
C) £27,750 unfavourable.
D) £24,000 unfavourable.

Question 50

Figure 17-4
Shannon Ltd.'s standard cost card contained the following information:
Direct labour: 1.25 hours * £8.00 per hour = £10.00
Shannon planned to make 12,000 units. Shannon actually made 10,000 units using 13,000 hours.

-Refer to Figure 17-4. Shannon's standard hours allowed for production was

A) 12,500.
B) 15,000.
C) 16,250.
D) 13,000.

Question 51

Figure 17-3
Tuvok Ltd. has developed the following standards for one of its products:
During October, 14,000 direct labour hours were worked at a standard cost of £40 per hour. If the labour rate variance for October was £70,000 favourable, the actual cost per labour hour must be

A) £35.
B) £40.
C) £45.
D) none of the above.

Question 52

Figure 17-5
Ebola Company has developed the following standards for one of its products: The following activities occurred during the month of October: The company records materials price variances at the time of purchase.
Refer to Figure 17-5. Ebola's variable overhead spending variance would be

A) £36,000 favourable.
B) £36,000 unfavourable.
C) £40,000 favourable.
D) £40,000 unfavourable.

Question 53

Figure 17-3
Tuvok Ltd. has developed the following standards for one of its products:
Refer to Figure 17-3. Tuvok's materials usage variance is

A) £1,000 unfavourable.
B) £1,100 unfavourable.
C) £2,000 unfavourable.
D) cannot be determined from the information given.

Question 54

Figure 17-3
Tuvok Ltd. has developed the following standards for one of its products:
Refer to Figure 17-3. Tuvok's material price variance is

A) £1,000 unfavourable.
B) £2,000 unfavourable.
C) £1,100 unfavourable.
D) cannot be computed from the information given.

Question 55

Figure 17-5
Ebola Company has developed the following standards for one of its products: The following activities occurred during the month of October: The company records materials price variances at the time of purchase.
Refer to Figure 17-5. Ebola's variable overhead efficiency variance would be

A) £4,000 favourable.
B) £4,000 unfavourable.
C) £8,000 favourable.
D) £12,000 unfavourable.

Question 56

Figure 17-6
Refer to Figure 17-6. The variable overhead efficiency variance would be

A) £1,000 favourable.
B) £600 favourable.
C) £400 favourable.
D) £200 favourable.

Question 57

Figure 17-5
Ebola Company has developed the following standards for one of its products: The following activities occurred during the month of October: The company records materials price variances at the time of purchase.
Refer to Figure 17-5. Ebola's materials price variance would be

A) £46,000 favourable.
B) £46,000 unfavourable.
C) £44,000 favourable.
D) £44,000 unfavourable.

Question 58

Fortensky Construction planned to produce 275,000 units using 34,375 machine hours. Actual output was 290,000 units using 37,425 machine hours. Fortensky's volume variance

A) was favourable.
B) was unfavourable.
C) was zero.
D) cannot be determined from the information given.

Question 59

Figure 17-5
Ebola Company has developed the following standards for one of its products: The following activities occurred during the month of October: The company records materials price variances at the time of purchase.
Refer to Figure 17-5. Ebola's labour rate variance would be

A) £15,000 unfavourable.
B) £15,000 favourable.
C) £15,300 unfavourable.
D) £15,300 favourable.

Question 60

Figure 17-6
Refer to Figure 17-6. The standard rate for total overhead is

A) £14.
B) £13.
C) £10.
D) £4.

Question 61

Figure 17-8
The following information was extracted from the accounting records of Noelle Company: Budgeted fixed overhead for the period is £420,000, and the budgeted fixed overhead rate is based on an expected capacity of 30,000 direct labour hours.
The following information is available regarding the company's operations for the period:
Refer to Figure 17-8. Noelle's standard fixed overhead rate is

A) £14.82.
B) £14.48.
C) £14.34.
D) £14.00.

Question 62

Figure 17-7
Orient Company has developed the following standards for one of its products: The following activities occurred during the month of November: The company records materials price variances at the time of purchase.
Refer to Figure 17-7. Orient's materials price variance would be

A) £22,000 unfavourable.
B) £18,000 unfavourable.
C) £6,000 unfavourable.
D) £4,000 unfavourable.

Question 63

Figure 17-8
The following information was extracted from the accounting records of Noelle Company: Budgeted fixed overhead for the period is £420,000, and the budgeted fixed overhead rate is based on an expected capacity of 30,000 direct labour hours.
The following information is available regarding the company's operations for the period:
Refer to Figure 17-8. Noelle's fixed overhead spending variance would be

A) £10,000 unfavourable.
B) £11,000 unfavourable.
C) £21,000 favourable.
D) £31,000 favourable.

Question 64

The following standard costs were developed for one of Commodore Company's products: The following information is available regarding the company's operations for the period: Budgeted fixed overhead for the period is £280,000, and expected capacity for the period is 28,000 direct labour hours.
Required:
a.
Calculate the standard fixed overhead rate.
b.
Complete the standard cost card for the product.

Question 65

Figure 17-7
Orient Company has developed the following standards for one of its products: The following activities occurred during the month of November: The company records materials price variances at the time of purchase.
Refer to Figure 17-7. Orient's labour efficiency variance would be

A) £12,000 unfavourable.
B) £12,000 favourable.
C) £8,400 favourable.
D) £3,600 unfavourable.

Question 66

Figure 17-8
The following information was extracted from the accounting records of Noelle Company: Budgeted fixed overhead for the period is £420,000, and the budgeted fixed overhead rate is based on an expected capacity of 30,000 direct labour hours.
The following information is available regarding the company's operations for the period:
Refer to Figure 17-8. Noelle's fixed overhead volume variance would be

A) £10,000 unfavourable.
B) £11,000 unfavourable.
C) £21,000 favourable.
D) £31,000 favourable.

Question 67

Figure 17-8
The following information was extracted from the accounting records of Noelle Company: Budgeted fixed overhead for the period is £420,000, and the budgeted fixed overhead rate is based on an expected capacity of 30,000 direct labour hours.
The following information is available regarding the company's operations for the period:
Taylor Company's budgeted sales were 10,000 units at £200 per unit. Actual sales were 9,200 units at £210 per unit. Taylor's sales price variance is

A) £68,000 (U).
B) £100,000 (U).
C) £8,000 (U).
D) £92,000 (F).

Question 68

Figure 17-8
The following information was extracted from the accounting records of Noelle Company: Budgeted fixed overhead for the period is £420,000, and the budgeted fixed overhead rate is based on an expected capacity of 30,000 direct labour hours.
The following information is available regarding the company's operations for the period:
Refer to Figure 17-8. Noelle's variable overhead spending variance would be

A) £7,000 favourable.
B) £8,000 unfavourable.
C) £15,000 favourable.
D) £23,000 unfavourable.

Question 69

The volume variance is caused by:

A) the difference between the activity allowed for the actual output and the budgeted activity used in computing the fixed overhead rate.
B) the difference between total budgeted fixed overhead and total standard fixed overhead assigned to production.
C) the difference between the activity allowed for the actual output and the total standard fixed overhead assigned to production.
D) the difference between the standard fixed overhead rate and the actual fixed overhead rate.

Question 70

Figure 17-8
The following information was extracted from the accounting records of Noelle Company: Budgeted fixed overhead for the period is £420,000, and the budgeted fixed overhead rate is based on an expected capacity of 30,000 direct labour hours.
The following information is available regarding the company's operations for the period:
Franklin Company expected sales were 2,000 units at £100 per unit. During 2011, it had actual sales of 1,800 units at £110 per unit. Budgeted variable costs were £60 per unit. What is Franklin's sales price variance?

A) £8,000 (U)
B) £20,000 (U)
C) £18,000 (F)
D) £2,000 (U)

Question 71

Figure 17-8
The following information was extracted from the accounting records of Noelle Company: Budgeted fixed overhead for the period is £420,000, and the budgeted fixed overhead rate is based on an expected capacity of 30,000 direct labour hours.
The following information is available regarding the company's operations for the period:
Refer to Figure 17-8. Noelle's variable overhead efficiency variance would be

A) £7,000 favourable.
B) £8,000 unfavourable.
C) £15,000 favourable.
D) £23,000 unfavourable.

Question 72

Figure 17-7
Orient Company has developed the following standards for one of its products: The following activities occurred during the month of November: The company records materials price variances at the time of purchase.
Refer to Figure 17-7. Orient's materials usage variance would be

A) £22,000 unfavourable.
B) £12,000 favourable.
C) £10,000 unfavourable.
D) £4,000 unfavourable.

Question 73

Figure 17-7
Orient Company has developed the following standards for one of its products: The following activities occurred during the month of November: The company records materials price variances at the time of purchase.
Refer to Figure 17-7. Orient's labour rate variance would be

A) £12,000 unfavourable.
B) £12,000 favourable.
C) £8,400 favourable.
D) £3,600 unfavourable.

Question 74

Figure 17-8
The following information was extracted from the accounting records of Noelle Company: Budgeted fixed overhead for the period is £420,000, and the budgeted fixed overhead rate is based on an expected capacity of 30,000 direct labour hours.
The following information is available regarding the company's operations for the period:
A sales volume variance will be favourable when:

A) actual units sold is greater than budgeted sales volume.
B) actual units sold is less than budgeted sales volume.
C) actual selling price is greater than budgeted selling price.
D) actual contribution margin is greater than budgeted contribution margin.

Question 75

For planning and control purposes, fixed overhead is NOT included in the standard cost per unit because:

A) it is incurred based on the number of units produced.
B) the number of units produced do not vary from period to period.
C) it can best be controlled on a lump-sum basis.
D) of all of the above

Question 76

Figure 17-8
The following information was extracted from the accounting records of Noelle Company: Budgeted fixed overhead for the period is £420,000, and the budgeted fixed overhead rate is based on an expected capacity of 30,000 direct labour hours.
The following information is available regarding the company's operations for the period:
The sales price variance is created by a difference between

A) actual and standard contribution margin.
B) actual and expected sales price.
C) expected and standard net income.
D) actual and expected sales volume.

Question 77

Figure 17-7
Orient Company has developed the following standards for one of its products: The following activities occurred during the month of November: The company records materials price variances at the time of purchase.
Refer to Figure 17-7. Orient's variable overhead efficiency variance would be

A) £1,200 unfavourable.
B) £3,600 unfavourable.
C) £4,800 unfavourable.
D) £4,800 favourable.

Question 78

Figure 17-7
Orient Company has developed the following standards for one of its products: The following activities occurred during the month of November: The company records materials price variances at the time of purchase.
Refer to Figure 17-7. Orient's variable overhead spending variance would be

A) £4,800 favourable.
B) £4,800 unfavourable.
C) £3,600 unfavourable.
D) £1,200 unfavourable.

Question 79

Mills Company uses standard costing for direct materials and direct labour. Management would like to use standard costing for variable and fixed overhead.
The following monthly cost functions were developed for overhead items: The cost functions are considered reliable within a relevant range of 70,000 to 100,000 direct labour hours. The company expects to operate at 80,000 direct labour hours per month.
Information for the month of September is as follows: Required:

Question 80

The following standard costs were developed for one of Commodore Company's products:
STANDARD COST CARD
PER UNIT The following information is available regarding the company's operations for the period:
Units produced
15,000
Materials purchased
90,000 pounds at £3.60 per pound
Materials used
80,000 pounds
Direct labour
9,000 hours at £16.50 per hour
Overhead incurred:
Variable
£220,000
Fixed
£640,000
Budgeted fixed overhead for the period is £600,000, and expected capacity for the period is 20,000 direct labour hours.
Required:
a.
Calculate the standard fixed overhead rate.
b.
Complete the standard cost card for the product.