The cost functions are considered reliable within a relevant range of 25,000 to 50,000 direct labor hours per month. The company expects to operate at 30,000 hours per month.
Actual results for February are as follows:
McIntire Inc. developed the following monthly cost functions for manufacturing overhead:

Required:
(1) What are the following standard manufacturing overhead rates based on expected activity?
(a) Variable manufacturing overhead
(b) Fixed manufacturing overhead
(2) (a) Prepare a flexible budget using the following headings: Budget at
Overhead Cost VC/DLH Actual cost actual hrs. Variance
(b) Which variances need to be investigated and what are some probable causes?

Question

The cost functions are considered reliable within a relevant range of 25,000 to 50,000 direct labor hours per month. The company expects to operate at 30,000 hours per month.
Actual results for February are as follows:
  McIntire Inc. developed the following monthly cost functions for manufacturing overhead:
 
Required:
(1) What are the following standard manufacturing overhead rates based on expected activity?
(a) Variable manufacturing overhead
(b) Fixed manufacturing overhead
(2) (a) Prepare a flexible budget using the following headings: Budget at
Overhead Cost VC/DLH Actual cost actual hrs. Variance
(b) Which variances need to be investigated and what are some probable causes?

Quizplus · Accepted Answer

The Answer of The cost functions are considered reliable within a relevant range of 25,000 to 50,000 direct labor hours per month. The company expects to operate at 30,000 hours per month.
Actual results for February are as follows:
  McIntire Inc. developed the following monthly cost functions for manufacturing overhead:
 
Required:
(1) What are the following standard manufacturing overhead rates based on expected activity?
(a) Variable manufacturing overhead
(b) Fixed manufacturing overhead
(2) (a) Prepare a flexible budget using the following headings: Budget at
Overhead Cost VC/DLH Actual cost actual hrs. Variance
(b) Which variances need to be investigated and what are some probable causes?

The Cost Functions Are Considered Reliable Within a Relevant Range