Problem 2 (30 points) Crowe Corporation has developed a standard cost system to

Question

Problem 2 (30 points) Crowe Corporation has developed a standard cost system to account for its manufacturing operations. It has determined that for one of the products that it manufactures the attached standard costs and quantities apply Crowe estimated at the beginning of the year that they would incur $100,000 of variable manufacturing overhead costs in the Cutting Department while working 40,000 direct labor hours. They also estimated that they would incur $120,000 of variable manufacturing overhead costs in the Assembly Department while working 24,000 direct labor hours and using 20,000 machine hours. Fixed manufacturing overhead was budgeted at $120,000 which is to be applied based upon the number of direct labor hours worked in the Assembly Department. The actual results for producing 85,000 units during the current year are also attached. REQUIRED: Calculate the following items based upon the attached information. Round all rates to the nearest cent (two decimal places) and all variances to the nearest whole dollar (a) Predetermined Variable Manufacturing Overhead Rate for the Cutting Department. Predetermined Variable Manufacturing Overhead Rate for the Assembly Department. (b) (c) Predetermined Fixed Manufacturing Overhead Rate. (d) Direct Materials Price Variance (e) Direct Materials Quantity Variance (f)Direct Labor Price (Rate) and Quantity (Efficiency) Variance for the Cutting (g) (h) (i) Department. Direct Labor Price (Rate) and Quantity (Efficiency) Variance for the Assembly Department. Variable Manufacturing Overhead Price (Spending) and Quantity (Efficiency) Variance for the Cutting Department. Variable ManufacturingOverhead Price (Spending)andQuantity(Efficiency) Variance for the Assembly Department. () Fixed Manufacturing Overhead Price (Spending) Variance. (k) Fixed Manufacturing Overhead Volume (Quantity) Variance

Explanation / Answer

As per policy, only four parts of a question are allowed to answer at a time, so here answering a to f :

Problem 2) a) Predetermined variable manufacturing overhead rate for the cutting deptt: $100000 / 40000 DLHs = $2.50 per DLH b) Predetermined variable manufacturing overhead rate for the assembly deptt: $120000 / 20000 MHs = $6 per MH c) Predetermined Fixed Manufacturing overhead rate: $120000 / 24000 DLHs = $5 per DLH d) Direct Materials Price Variance : (Actual Price - Std. price) * Actual material used. ( (150800/260000) - 0.60)*260000 = $5200 F e) Direct Materials Quantity Variance : (Std quantity for actual production - Actual quantity used) * Std. Price (85000*3 - 260000) * 0.60 = $3000 U f) Cutting Deptt: DLRV : (Actual rate - std . Rate ) * Actual DLHs used (342300/42000 - 8) * 42000 = $6300 F Cutting Deptt : DLEV : (std. hours for actual units - actual hours used) * Std. rate (85000 * 0.50 - 42000) * 8 = $4000 F

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