Mountain Manufacturing Uses a Standard Cost System in Which Manufacturing

question 99

Essay

Mountain Manufacturing uses a standard cost system in which manufacturing overhead is applied to units of product on the basis of standard machine-hours. At standard, each unit of product requires one machine-hour to complete. The standard variable overhead is $1.75 per machine-hour and Budgeted Fixed Manufacturing Costs are $300,000 per year. The denominator level of activity is 150,000 machine-hours, or 150,000 units. Actual data for the year were as follows: $\begin{array}{lr}\text {Actual variable overhead cost. }&\$ 211,680 \\\text {Actual fixed manufacturing overhead cost }&\$ 315,000 \\\text {Actual machine-hours }&126,000 \\\text { Units produced}&120,000\end{array}$ Required:
a. What are the predetermined variable and fixed manufacturing overhead rates for the year?
b. Compute the variable overhead rate and efficiency variances for the year.
c. Compute the fixed manufacturing overhead budget and volume variances for the year.

Acquire knowledge on assessing potential bidders' financial status.

Comprehend different contract types and their application based on project scope and cost uncertainty.

Explain the structure and components of a cost reimbursable contract.

Recognize and understand the importance of standardized financial disclosure documents.

---

Definitions:

Quality Assurance

A systematic process designed to determine whether a product or service meets specified quality standards.

Traditional Product Costing Systems

Costing methods that typically allocate overhead costs based on a single volume-based cost driver, which may not accurately reflect the actual resources consumed by products.

Activity Rates

Predetermined charges used in activity-based costing to allocate costs to products or services based on the activities required for their production.

Quality Inspection

The process of examining and testing goods or services to ensure they meet specified standards of quality before they are sold or delivered.