Bigton Company Uses a Standard Costing System Bigton Uses Expected Capacity to Calculate Standard Overhead Rates

question 3

Essay

Bigton Company uses a standard costing system.The following monthly cost functions apply to its manufacturing overhead items:
Information for the month of November is as follows:
$$\begin{array} { l r } \text { Overhead Item } & \text { Cost Function } \\\text { Indirect materials } & \$ 0.80 \text { per DLH } \\\text { Indirect labour } & \$ 1.00 \text { per DLH } \\\text { Utilities } & \$ 0.40 \text { per DLH } \\\text { Insurance } & \$ 8,000 \\\text { Depreciation } & \$ 32,000\end{array}$$ Bigton uses expected capacity to calculate standard overhead rates.The monthly expected capacity is 25,000 hours.
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:

Measurement Date

The specific date at which the values of assets and liabilities are determined in the preparation of financial statements.

Stock Appreciation Rights

A type of employee compensation linked to the increase in the company's stock price over a set period, allowing employees to profit from the appreciation without owning the stock.

Compensation Expense

The total cost incurred by a business for the payment of salaries, wages, benefits, and other forms of compensation to employees.

Options Pricing Model

A mathematical model used to determine the theoretical value of options, taking into account factors like the stock price, strike price, and volatility.