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Baird Company makes Polish sausage. It applied manufacturing overhead to production based on standard direct labor-hours. According to the company's planning budget, the following manufacturing overhead costs should be incurred at an activity level of 27,000 labor-hours (the denominator activity level): Variable manufacturing overhead cost Fixed manufacturing overhead cost Total manufacturing overhead cost $ 135,000 189,000 $ 324,000 During the most recent year, the following operating results were recorded: Activity: Actual labor-hours worked Standard labor-hours allowed for the actual output 24,000 25,000 Cost: Actual variable manufacturing overhead cost incurred Actual fixed manufacturing overhead cost incurred $ 156,000 $ 168,750 At the end of the year, the company's Manufacturing Overhead account contained the following data: Manufacturing Overhead Debit Credit Actual 324,750 Applied 300,000 24,750 Management would like to determine the cause of the $24,750 underapplied overhead. Required: 1. Compute the predetermined overhead rate. Break the rate down into variable and fixed cost elements. 2. Show how the $300,000 Applied figure in the Manufacturing Overhead account was computed. 3. Break down the $24,750 underapplied overhead into four components: 1. variable overhead rate variance, 2. variable overhead efficiency variance, 3. fixed overhead budget variance, and 4. fixed overhead volume variance.

Baird Company makes Polish sausage. It applied manufacturing overhead to production based on standard direct labor-hours. According to the company's planning budget, the following manufacturing overhead costs should be incurred at an activity level of 27,000 labor-hours (the denominator activity level): Variable manufacturing overhead cost Fixed manufacturing overhead cost Total manufacturing overhead cost $ 135,000 189,000 $ 324,000 During the most recent year, the following operating results were recorded: Activity: Actual labor-hours worked Standard labor-hours allowed for the actual output 24,000 25,000 Cost: Actual variable manufacturing overhead cost incurred Actual fixed manufacturing overhead cost incurred $ 156,000 $ 168,750 At the end of the year, the company's Manufacturing Overhead account contained the following data: Manufacturing Overhead Debit Credit Actual 324,750 Applied 300,000 24,750 Management would like to determine the cause of the $24,750 underapplied overhead. Required: 1. Compute the predetermined overhead rate. Break the rate down into variable and fixed cost elements. 2. Show how the $300,000 Applied figure in the Manufacturing Overhead account was computed. 3. Break down the $24,750 underapplied overhead into four components: 1. variable overhead rate variance, 2. variable overhead efficiency variance, 3. fixed overhead budget variance, and 4. fixed overhead volume variance.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Baird Company makes Polish sausage. It applied manufacturing overhead to production based on standard direct labor-hours. According to the company's planning budget, the following manufacturing overhead costs should be incurred at an activity level of 27,000 labor-hours (the denominator activity level): Variable manufacturing overhead cost Fixed manufacturing overhead cost Total manufacturing overhead cost $ 135,000 189,000 $ 324,000 During the most recent year, the following operating results were recorded: Activity: Actual labor-hours worked Standard labor-hours allowed for the actual output Cost: Actual variable manufacturing overhead cost incurred Actual fixed manufacturing overhead cost incurred 24,000 25,000 $ 156,000 $ 168,750 At the end of the year, the company's Manufacturing Overhead account contained the following data: Manufacturing Overhead Debit Credit Actual 324,750 Applied 300,000 24,750 Management would like to determine the cause of the $24,750 underapplied overhead. Required: 1. Compute the predetermined overhead rate. Break the rate down into variable and fixed cost elements. 2. Show how the $300,000 Applied figure in the Manufacturing Overhead account was computed. 3. Break down the $24,750 underapplied overhead into four components: 1. variable overhead rate variance, 2. variable overhead efficiency variance, 3. fixed overhead budget variance, and 4. fixed overhead volume variance.
Transcribed Image Text:Baird Company makes Polish sausage. It applied manufacturing overhead to production based on standard direct labor-hours. According to the company's planning budget, the following manufacturing overhead costs should be incurred at an activity level of 27,000 labor-hours (the denominator activity level): Variable manufacturing overhead cost Fixed manufacturing overhead cost Total manufacturing overhead cost $ 135,000 189,000 $ 324,000 During the most recent year, the following operating results were recorded: Activity: Actual labor-hours worked Standard labor-hours allowed for the actual output Cost: Actual variable manufacturing overhead cost incurred Actual fixed manufacturing overhead cost incurred 24,000 25,000 $ 156,000 $ 168,750 At the end of the year, the company's Manufacturing Overhead account contained the following data: Manufacturing Overhead Debit Credit Actual 324,750 Applied 300,000 24,750 Management would like to determine the cause of the $24,750 underapplied overhead. Required: 1. Compute the predetermined overhead rate. Break the rate down into variable and fixed cost elements. 2. Show how the $300,000 Applied figure in the Manufacturing Overhead account was computed. 3. Break down the $24,750 underapplied overhead into four components: 1. variable overhead rate variance, 2. variable overhead efficiency variance, 3. fixed overhead budget variance, and 4. fixed overhead volume variance.
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