Question

Top Eagle Company makes customized golf shirts for sale to golf courses. Each shirt requires 1.5 hours to produce because of the customized logo for each golf course. Top Eagle uses direct labor-hours to allocate the overhead cost to production. Fixed overhead costs, including rent, depreciation, supervisory salaries, and other production expenses, are budgeted at $15,600 per month. The facility currently used is large enough to produce 1,300 shirts per month. During March, Top Eagle produced 620 shirts and actual fixed costs were $12,200 Read the requirements.

Answer 1

Requirement 1 & 2 Computing Fixed OH rate per direct labor hour Estimated Total Fixed OH costs/Estimated direct labor hours Fixed OH rate $ 15600 1950 8.00 (1300 1.50) per DLH Static budget Actual Costs Incurred Allocated OH 15600 7440 12200 (620 1.50*8) Fixed OH Spending Variance Static budget Actual Costs Incurred Spending Variance 15600 12200 3400 F Production Volume-Variance Production-Volume Variance Static budget Allocated OH 7440 15600 8160 U