Flick Company Uses a Standard Cost System

question 2

Essay

Flick Company uses a standard cost system.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:

Net Loss

Occurs when a company's total expenses exceed its total revenues, indicating a negative profit for a specific time period.

Prepaid Insurance

An asset account that represents benefit expenses that have been paid in advance and are gradually recognized as expenses over the policy period.

Unearned Revenue

Money received by a company for goods or services yet to be delivered or provided, considered a liability until the goods or services are delivered.

Double Rule

A method used in accounting to draw attention to totals or end of reports by placing two lines beneath them for emphasis.