Ut Ultrasonic manufactures three ultrasound imaging systems: Avex, AvexII, and Mel. Overhead is allocated to each system based on standard direct material dollars in each system. The firm uses a flexible overhead budget to calculate the overhead rate for the coming year, where budgeted volume is based on expected (projected) direct material dollars. The following table summarizes operations for the year: Selling price Projected production (units) Standard direct labor per unit Standard direct materials per unit Actual units produced Total direct materials actually used Avex $7,800 1,200 $150 $2,600 1,400 $3,967,600 Avexil $10,700 650 $200 $3,300 5:30 $1,679,040 Mel $15,750 350 $420 $4,800 410 $2,027,040 Fixed manufacturing overhead was budgeted at $7.5 million, and variable overhead was budgeted at $0.30 per direct material dollar. In other words, each dollar spent on direct materials is expected to generate $0.30 of variable manufacturing overhead. Actual overhead incurred during the year was $10.280 million. Required: a. Calculate the budgeted overhead rate Ultrasonic will use to absorb overhead to products. Round the overhead rate to two significant digits. b. Calculate the total amount of over- or underabsorbed overhead Ultrasonic reports for the year. c. Compute the overhead spending variance, the overhead volume variance, and the overhead efficiency variance.
Ut Ultrasonic manufactures three ultrasound imaging systems: Avex, AvexII, and Mel. Overhead is allocated to each system based on standard direct material dollars in each system. The firm uses a flexible overhead budget to calculate the overhead rate for the coming year, where budgeted volume is based on expected (projected) direct material dollars. The following table summarizes operations for the year: Selling price Projected production (units) Standard direct labor per unit Standard direct materials per unit Actual units produced Total direct materials actually used Avex $7,800 1,200 $150 $2,600 1,400 $3,967,600 Avexil $10,700 650 $200 $3,300 5:30 $1,679,040 Mel $15,750 350 $420 $4,800 410 $2,027,040 Fixed manufacturing overhead was budgeted at $7.5 million, and variable overhead was budgeted at $0.30 per direct material dollar. In other words, each dollar spent on direct materials is expected to generate $0.30 of variable manufacturing overhead. Actual overhead incurred during the year was $10.280 million. Required: a. Calculate the budgeted overhead rate Ultrasonic will use to absorb overhead to products. Round the overhead rate to two significant digits. b. Calculate the total amount of over- or underabsorbed overhead Ultrasonic reports for the year. c. Compute the overhead spending variance, the overhead volume variance, and the overhead efficiency variance.
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Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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Transcribed Image Text:Ut
Ultrasonic manufactures three ultrasound imaging systems: Avex, AvexII, and Mel. Overhead is
allocated to each system based on standard direct material dollars in each system. The firm uses a
flexible overhead budget to calculate the overhead rate for the coming year, where budgeted volume
is based on expected (projected) direct material dollars. The following table summarizes operations
for the year:
Selling price
Projected production (units)
Standard direct labor per unit
Standard direct materials per unit
Actual units produced
Total direct materials actually used
Avex
$7,800
1,200
$150
$2,600
1,400
$3,967,600
Avexl
$10,700
650
$200
$3,300
530
$1,679,040
Mel
$15,750
350
$420
$4,800
410
$2,027,040
Fixed manufacturing overhead was budgeted at $7.5 million, and variable overhead was
budgeted at $0.30 per direct material dollar. In other words, each dollar spent on direct materials
is expected to generate $0.30 of variable manufacturing overhead. Actual overhead incurred during
the year was $10.280 million.
Required:
a. Calculate the budgeted overhead rate Ultrasonic will use to absorb overhead to products.
Round the overhead rate to two significant digits.
b. Calculate the total amount of over- or underabsorbed overhead Ultrasonic reports for the
year.
c. Compute the overhead spending variance, the overhead volume variance, and the overhead
efficiency variance.
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