Asked by hannah pyron on Jul 08, 2024
Verified
Moozi Dairy Products processes and sells two products: milk and butter.Last year, Moozi budgeted $1,200,000 of fixed manufacturing overhead and chose a denominator level of activity of 80,000 machine-hours.Each unit of milk at Moozi has a standard of 0.1 machine-hours and each unit of butter has a standard of 0.08 machine-hours.Last year, Moozi processed 560,000 units of milk and 340,000 units of butter.Moozi's total fixed manufacturing overhead incurred last year was $1,256,000.Actual machine-hours incurred for the year were 82,000.Moozi applies manufacturing overhead to its products on the basis of standard machine-hours.
Required:
Compute Moozi's fixed manufacturing overhead variances for last year.
Fixed Manufacturing Overhead
Ongoing, consistent expenses associated with manufacturing operations, such as rent, salaries, and utilities, regardless of production levels.
Denominator Level
The activity level chosen to compute the predetermined overhead rate, reflecting expected or actual activity.
Machine-Hours
A measurement of the amount of time machines are run during production, often used as a basis for allocating manufacturing overhead.
- Appraise the differences in planned vs. actual fixed overhead, specifically concerning volume and budget.
- Understand the relationship between budgeted and actual manufacturing overhead.
Verified Answer
= $1,256,000 − $1,200,000 = $56,000 U
Volume variance = Budgeted fixed overhead - Fixed overhead applied to work in process
= $1,200,000 − {[(560,000 units of milk × 0.1 MH per unit of milk)+ (340,000 units of butter × 0.08 MH per unit of butter)] × ($1,200,000/80,000 MHs)}
= $1,200,000 - {[(56,000 MHs)+ (27,200 MHs)] × $15 per MH}
= $1,200,000 - {83,200 MHs)× $15 per MH}
= $1,200,000 - $1,248,000
= $48,000 F
Learning Objectives
- Appraise the differences in planned vs. actual fixed overhead, specifically concerning volume and budget.
- Understand the relationship between budgeted and actual manufacturing overhead.
Related questions
Edlow Incorporated Makes a Single Product--A Critical Part Used in ...
Berk Incorporated Makes a Single Product--A Critical Part Used in ...
Pearlman Incorporated Makes a Single Product--An Electrical Motor Used in ...
Goolden Electronics Corporation Has a Standard Cost System in Which ...
Hoag Corporation Applies Manufacturing Overhead to Products on the Basis ...