College Memories, Inc., publishes college yearbooks. A monthly flexible overhead budget for the firm follows. Budgeted Cost 1,500 1,750 2,000 Variable costs: Indirect material: Glue .....................................$ 750 $ 875 $ 1,000 Tape ............................................300 350 400 Miscellaneous supplies ...............3,000 3,500 4,000 Indirect labor ..............................7,500 8,750 10,000 Utilities: Electricity ..............................1,500 1,750 2,000 Natural gas ..................................450 525 600 Total variable cost $ 13,500 $ 15,750 $ 18,000 Fixed costs: Supervisory labor.................. 12,500 12,500 12,500 Depreciation .............................3,400 3,400 3,400 Property taxes and insurance.4,100 4,100 4,100 Total fixed cost .....................$ 20,000 $ 20,000 $ 20,000 Total overhead cost .............$ 33,500 $ 35,750 $ 38,000" "he planned monthly production is 6,400 yearbooks. The standard direct-labor allowance is .25 hour per book and overhead is budgeted and applied on the basis of direct-labor hours. During February, College Memories, Inc., produced 8,000 yearbooks and actually used 2,100 direct-labor hours. The actual overhead costs for the month were as follows: Actual variable overhead…………………………...$19,530 Actual Fixed overhead………………………………37,600 Required: 1.Determine the formula-style flexible overhead budget for College Memories, Inc.
College Memories, Inc., publishes college yearbooks. A monthly flexible
Budgeted Cost 1,500 1,750 2,000
Variable costs:
Indirect material:
Glue .....................................$ 750 $ 875 $ 1,000
Tape ............................................300 350 400
Miscellaneous supplies ...............3,000 3,500 4,000
Indirect labor ..............................7,500 8,750 10,000
Utilities:
Electricity ..............................1,500 1,750 2,000
Natural gas ..................................450 525 600
Total variable cost $ 13,500 $ 15,750 $ 18,000
Fixed costs:
Supervisory labor.................. 12,500 12,500 12,500
Depreciation .............................3,400 3,400 3,400
Property taxes and insurance.4,100 4,100 4,100
Total fixed cost .....................$ 20,000 $ 20,000 $ 20,000
Total overhead cost .............$ 33,500 $ 35,750 $ 38,000"
"he planned monthly production is 6,400 yearbooks. The standard direct-labor allowance is .25 hour per book and overhead is budgeted and applied on the basis of direct-labor hours. During February, College Memories, Inc., produced 8,000 yearbooks and actually used 2,100 direct-labor hours. The actual overhead costs for the month were as follows:
Actual variable overhead…………………………...$19,530
Actual Fixed overhead………………………………37,600
Required:
1.Determine the formula-style flexible overhead budget for College Memories, Inc.
2.Prepare a display similar to Exhibit 11–6, which shows College Memories’ variable-overhead vari-ances for February. Indicate whether each variance is favorable or unfavorable.
3.Draw a graph similar to Exhibit 11–7, which shows College Memories’ variable-overhead vari-ances for February.
4.Interpret each of the variances computed in requirement 2.
5.Prepare a display similar to Exhibit 11–8, which shows College Memories’ fixed-overhead vari-ances for February.
6.Draw a graph similar to Exhibit 11–9, which depicts the company’s applied and budgeted fixed overhead for February. Show the firm’s February volume variance on the graph.
7.Interpret each of the variances computed in requirement 5.
8.Prepare
9.Draw T-accounts for all of the accounts used in the journal entries of requirement 8. Then
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