Question

Urbana Company calculates its predetermined manufacturing overhead rates using normal capacity, which is 288,000 units. The standard cost system allows 2 direct labor hours per unit produced. Manufacturing overhead is applied using direct labor hours. The total budgeted manufacturing overhead is $3,168,000, of which $864,000 is fixed manufacturing overhead. The actual results for the year are as follows.

Answer 1

Standard labor hours Budgeted units Standard hours required per unit Standard direct labor hours (288,000 x 2) 288,000 units 2 hours per unit 576,000 hours $ Standard variable manufacturing cost Total Manufacturing cost Less: Fixed Manufacturing Cost Standard variable manufacturing costs 3,168,000 (864,000) 2,304,000 $ Standard variable cost per unit (2,304,000 / 576,000) $ 4.00 per hour Actual direct labor hours used 570,000 hours Variable manufacturing overhead efficiency (Actual hours - Standard hours ) x Standard rate per hour (570,000 - 576,000) $ 4 24,000 Favorable Answer (a) $24,000 F