Accurate-Time Company Makes Watches

question 129

Essay

Accurate-time Company makes watches.The fixed overhead costs for 2018 total $444 000.The company uses direct labour-hours for fixed overhead allocation and anticipates 14 800 hours during the year for 780 000 units.An equal number of units is budgeted for each month.
During October,58 000 watches were produced and $28 000 was spent on fixed overhead.
Required:
a.Determine the fixed overhead rate for 2018 based on the units of input.
b.Determine the fixed overhead static-budget variance for October.
c.Determine the production-volume overhead variance for October.
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Definitions:

Economic Life

Refers to the duration over which an asset remains productive or useful for its intended purpose.

Capital Lease

A lease agreement that is considered a purchase of an asset for accounting purposes, because it transfers substantially all the risks and rewards of ownership.

Bargain Purchase Price

A price for an asset that is significantly below its fair market value.

CRA

Credit Risk Analysis, assessing the risk of default on a loan by evaluating the potential borrower's creditworthiness, or it could stand for Canada Revenue Agency, the federal agency responsible for tax laws for the Canadian government.