Flick Company Uses a Standard Cost System in Which Manufacturing

question 89

Essay

Flick Company uses a standard cost system in which manufacturing overhead is applied to units of product on the basis of direct labour-hours.The company's total budgeted variable and fixed manufacturing overhead costs at the denominator level of activity are $20,000 for variable overhead and $30,000 for fixed overhead.The predetermined overhead rate,including both fixed and variable components,is $2.50 per direct labour-hour.The standards call for two direct labour-hours per unit of output produced.Last year,the company produced 11,500 units of product and worked 22,000 direct labour-hours.Actual costs were $22,500 for variable overhead and $31,000 for fixed overhead.
Required:
a.What is the denominator level of activity?
b.What were the standard hours allowed for the output last year?
c.What was the variable overhead spending variance?
d.What was the variable overhead efficiency variance?
e.What was the fixed overhead budget variance?
f.What was the fixed overhead volume variance?

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Definitions:

Overallotment Option

A provision that allows underwriters to sell investors more shares than initially planned by the issuer, typically in an Initial Public Offering (IPO).

IPO Underpricing

The phenomenon where the initial offering price of a stock is set lower than the market price on its first trading day.

Underpricing

A situation in which a new issue of securities is priced below its market value, leading to immediate gains for investors when the stock is traded publicly for the first time.

Value

The economic, physical, or appraised valuation of a resource, merchandise, or assistance.