Optimum Company Uses Standard Costing for Direct Materials and Direct

question 124

Essay

Optimum Company uses standard costing for direct materials and direct labour.Management would like to use standard costing for variable and fixed overhead.
The following monthly cost functions were developed for manufacturing overhead items:
The cost functions are considered reliable within a relevant range of 20,000 to 40,000 direct labour hours.The company expects to operate at 25,000 direct labour hours per month.
Information for the month of June is as follows:
$\begin{array}{lr}\text { Overhead Item } & \text { Cost Function } \\\text { Indirect materials } & \$ 1.00 \text { per DLH } \\\text { Indirect labour } & \$ 1.25 \text { per DLH } \\\text { Utilities } & \$ 0.50 \text { per DLH } \\\text { Insurance } & \$ 10,000 \\\text { Depreciation } & \$ 40,000\end{array}$ Required:
$\begin{array}{lr}\text { Actual overhead costs incurred: } & \\\text { Indirect materials } & \$ 20,000 \\\text { Indirect labour } & 30,000 \\\text { Utilities } & 12,000 \\\text { Insurance } & 11,000 \\\text { Depreciation } & 40,000 \\\text { Total } & \$ 113,000\\\\\text { Actual direct labour hours worked: }&24,000\\\text { Standard direct labour hours allowed for production achieved: }&27,000\end{array}$ A. Calculate the following standard manufacturing overhead rates based upon expected capacity:
1. Variable manufacturing overhead
2. Fixed manufacturing overhead rate
3. Total manufacturing overhead rate

B. Calculate the following variances:
1. Variable overhead spending variance
2. Variable overhead efficiency variance
3. Fixed overhead spending variance
4. Fixed overhead volume variance

---

Definitions:

Object-oriented Program Design

Involves utilizing principles of object-oriented programming to create structured and modular programs using objects, classes, inheritance, polymorphism, and encapsulation.

Procedural Program Design

Procedural Program Design is a programming paradigm that uses procedures or routines to perform tasks, focusing on the sequence of executable statements to change the program's state.

C++

C++ is a high-level programming language developed by Bjarne Stroustrup as an extension of the C programming language, known for its object orientation and generic programming features.

Procedural Programs

Programs based on the procedural programming paradigm, which use procedures or routines to perform tasks or calculations.