Atkinson Manufacturing produces caramic teapots. Atkinson allocates ovarhead bas

Question

Atkinson Manufacturing produces caramic teapots. Atkinson allocates ovarhead basad on tha number of direct labor hours. The company is looking into using a standard cost system and has developed the following standards (one "unit is a batch of 100 teapots) EEB (Click the icon to view the standards.) Actual cost and operating data from the most recent month are as folla Requirements EEB (Click the icon to view the actual resuts.) All manufacturing overhead is allocated on the basis of direct labor hours Read the requirements. Data Table 1. Calculate the standard cost of one batch. Purchased 1.200 pounds at a cost of $0.70 per pound Used 1,100 pounds in producing 40 batches Actual direct labor cost of S2,279 at an average direct labor cost per hour of $10.60 Actual variable MOH $538 Actual fxed MOH $2.250 2. Calculate the following variances: Requirement 1. Calculate the standard cost of one batch a. The direct material variances. b. The direct labor variances c. The variable manufacturing overhead variances. d. The fixed manufacturing overhead variances. Have the company's managers done a good jab ar a poor job controlling materials, labor, and overhead costs? Why or why not? Describe how the company' system. Do you think the system? Standard cost Standard cost per batch Direct materials Direct labor Variable MOH 3. s managers can benefit from the standard costing company should continue with the standard cost 4. Fbred MOH Print Done Total standard cost Data Table PrintDone Standards: Direct material 20 pounds per batch at 51.00 per pound Direct labor 5.0 hours per batch at $10.00 per hour Variable MOH standard rate 52 00 per direct labor hour Predetermined fixed MOH standard rete $6.00 per direct labor hour Total budgeted fixad MOH cost $1,850 PrintDone

Explanation / Answer

Computation of Standard Cost of One Batch Standard Cost Standard Cost/Batch Direct Material (20 pounds*$1/Pound) $20.00 Direct Labour (5 Hours*$10/Hour) $50.00 Variable MOH ( 5 Hour*$2) $10.00 Fixed MOH (5Hour * $6) $30.00 Total Standard Cost $110.00 Computation of Direct Material Price & Quantity Variance Direct Material Price variance (SP-AP)AQ ($1-$0.70)*1200 $360 Favourable Direc Material Quantity Variance (SQ-AQ)SP {(20*40)-1100)}*1 ($300) Unfavourable Computation of Direct Labour Rate & Efficiency Variance Direct Labour Rate variance (SR-AR)*AH ($10-$10.60)*($2279/10.60) ($129) Un Favourable Direct Labour Efficiency Variance (SH-AH)SR {(5*40)-(2279/10.60)}*10 ($150) Un Favourable Computation of variable Overhead   Rate & Efficiency & Spending   Variance Direct Variable Overhead Rate Variance ( SP-AP)*AH ($2-$538/220)*220 ($98) Un Favourable Direct Variable Overhead Efficiency Variance (SH-AH)SP (200-220)*2 ($40) Un Favourable Direct Variable Overhead Spending Variance Price variance+ Quantity Variance ($138) Un Favourable Computation of Fixed Overhead Rate & Volume & Spending   Variance Direct Fixed Overhead Rate Variance Budgeted OH- Actual OH $1850-$2250 ($400) Un Favourable Direct Fixed Overhead Volume Variance Standard Rate applied on standard Hour for actual Qty- Budgeted OH ($6*(5 Hour*40 Batch)-$1850 ($650) Un Favourable Direct Fixed Overhead Spending Variance Price variance+ Quantity Variance ($1,050) Un Favourable Part-3: Purchase Manger Done a good Job but other company's manager are not done a poor job

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