Bigton Company Uses a Standard Costing System Information for the Month of November Is as Follows

question 11

Essay

Bigton Company uses a standard costing system. The following monthly cost functions apply to its overhead items: $\begin{array}{lr}\text { Overhead Item }&\text { Cost Function }\\\text { Indirect materials } & \$ 0.80 \text { per DLH } \\\text { Indirect labour } & \$ 1.00 \text { per DLH } \\\text { Utilities } & \$ 0.40 \text { per DLH } \\\text { Insurance } & \$ 8,000 \\\text { Depreciation } & \$ 32,000\end{array}$ Information for the month of November is as follows: $$\begin{array}{l}\begin{array} { l r } \text { Actual overhead costs incurred: }\\\text { Indirect materials } & \$ 20,800 \\\text { Indirect labour } & 24,000 \\\text { Utilities } & 9,600 \\\text { Insurance } & 8,800 \\\text { Depreciation } & 32,000 \\\text { Total } & \$ 95,200 \\\hline\end{array}\end{array}$$ Actual direct labour hours worked 24,000
Standard direct labour hours allowed for production achieved 27,000
Bigton uses expected capacity to calculate standard overhead rates. The monthly expected capacity is 25,000 hours.
Required:
A. Calculate the following standard overhead rates based upon expected capacity:
Variable overhead rate
Fixed overhead rate
Total overhead rate
B. Calculate the following variances:
Variable overhead spending variance
Variable overhead efficiency variance
Fixed overhead spending variance
Fixed overhead volume variance

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Definitions:

Optimistic

Having a positive outlook or expectation about future outcomes or the general situation.

Future Earnings

The projected income a person or company is expected to generate in the future.

Public Saving

The portion of the government's revenue that remains after accounting for government spending.

Private Saving

The portion of households' income that is not spent on consumption but saved for future use.