Washington, Inc

question 71

Essay

Washington, Inc. has budgeted fixed factory overhead costs at $150,000 per month and variable factory overhead at a rate of $6 per direct-labour hour. The standard direct-labour hours allowed for January production were 18,000. An analysis of the factory overhead indicates that during January there was an unfavourable flexible budget variance of $5,000 and a favourable production volume variance of $3,000.
Required:
a. Compute the actual factory overhead cost for January.
b. Calculate the applied overhead cost for January.

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Definitions:

Central Planning

An economic system where the government makes all decisions on the production and distribution of goods and services.

Freedom of Enterprise

the ability of individuals to start and manage their own businesses without undue restriction or interference.

Entrepreneurs

Individuals who start, organize, manage, and assume the risk for a business or enterprise, often introducing new products or services to the market.

Economic Resources

Assets or materials that can be used in the production of goods and services, including labor, capital, and natural resources.