Homework SourseCase 1266 Part Level Submission You have started working as
Case 12-66 (Part Level Submission)
You have started working as a cost accountant for a firm that has only been in business for one month. The firm is able to buy a new type of biodegradable plastic at a fixed price of $100 per roll. The plastic is then cut and sealed to make garbage bags. Fixed factory overhead is estimated to be $125,000 per month. During this past month, 8,000 cartons of garbage bags were produced, which represents 80% of the activity volume. You are given the following information:
Calculate the following:
| Rolls of plastic used | 40 | ||||
| Variable overhead incurred | $61,000 | ||||
| Overhead efficiency variance | $5,000 | U | |||
| Standard costs per carton of garbage bags: | |||||
| Labour hours | 2 | ||||
| Wage rate | $8 | per hour | |||
| Total overhead | $20 | ||||
| Rolls of plastic | 0.004 | rolls |
Solution
Standard hours= standard hours for actual production
=2 x 8,000
=16,000 hrs
Standard overhead rate per hr= total overhead/ no of hrs per bag
=$20/2
=$10
Variable overhead efficiency variance = Standard overhead rate per hr x (standard hours -Actual hours)
- $ 5,000 = $ 10 x (16,000- Actual hours)
- $ 5,000 = $ 160,000 – 10 x Actual hours
10 x Actual hours = $ 160,000 + $ 5,000
Actual hours = $ 165,000 /10 = 16,500 hours
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Hope that helps.
Feel free to comment if you need further assistance J
