The Awesome Systems Company, Which Uses Direct Labor Hours to Assign

question 112

Essay

The Awesome Systems Company, which uses direct labor hours to assign overhead costs to products, developed the following standard cost for one of their products:
STANDARD COST CARD PER UNIT
Materials: 10 pounds × $8 per pound $80.00
Direct labor: 3 hours × $32 per hour 96.00
Variable manufacturing overhead: $20 per direct labor hour ?
Fixed manufacturing overhead ?
Total standard cost per unit ?
The following information is available regarding the company's operations for the period:
Units produced: 15,000
Materials purchased: 180,000 pounds @ $7.20 per pound
Materials used: 160,000 pounds
Direct labor: 18,000 hours @ $37.00 per hour
Manufacturing overhead incurred:
Variable $880,000
Fixed $2,560,000
Budgeted fixed manufacturing overhead for the period is $4,800,000, and expected capacity for the period is 60,000 direct labor hours.
Required:
a. Calculate the standard fixed manufacturing overhead rate.
b. Complete the standard cost card for the product.

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Definitions:

Net Income

The total profit or loss of a company after all revenues, expenses, and taxes have been accounted for.

Owner's Equity

Owner's equity represents the owner's claim to the assets of a business, calculated as the business's total assets minus its total liabilities.

Salvage Value

is the estimated residual value of an asset at the end of its useful life.

Depreciation Expense

The allocated amount of an asset's cost expensed over its useful life to account for wear and tear, obsolescence, or decline in value.