Kelton Company Uses Activity-Based Costing to Allocate Variable Manufacturing Overhead

question 40

Essay

Kelton Company uses activity-based costing to allocate variable manufacturing overhead costs to products.The company identified three activities with the following information for last month.
$\begin{array}{lllll}&&\text { Standard Quantity}&\text { Actual }&\text { Actual }\\ \text { Activity } & \text { Standard Rate } & \text { per Unit Produced } &\text { Costs } & \text { Quantity }\\\hline\text { Purchase orders } & \$ 80 \text { per order } & 0.10 \text { order per unit } & \$ 141,000 & 2,000 \text { orders } \\\text { Product testing } & \$ 2 \text { per test } & 0.50 \text { minutes per } & \$ 26,000 & 10,000 \text { test } \\& \text { minute } & \text { unit } & & \text { minutes } \\\text { Indirect labor } & \$ 5 \text { per direct } & 1 \text { hour per unit } & \$ 90,000 & 16,000 \text { direct }\\&\text { labor hour }&&\text { labor hour }\end{array}$
Kelton Company produced 18,750 units last month.Prepare a variance analysis,clearly labeling each variance as favorable or unfavorable.

---

Definitions:

HRIS

Human Resources Information System is a software or online solution used for data entry, data tracking, and data information needs of the HR, payroll, management, and accounting functions within a business.

Automation

The use of technology to perform tasks without human intervention, often applied to manufacturing, processes, and systems to increase efficiency and reduce human error.

Service Delivery

The process of providing services to customers or clients, focusing on the quality, efficiency, and effectiveness of the service.

Attrition

Loss of employees due to their voluntary departures from the firm through resignation, retirement, or death.