Affordable Electronics Inc. manufactures medium-quality, reasonably priced wireless speakers for home use. The company uses standards to control its costs. The labour standards that have been set for one speaker are as follows: Standard Hours 12 minutes (0.20 hours) Standard Rate per Hour $12.00 Standard Cost $2.40 During July, 2,550 hours of direct labour time were recorded to make 12,000 units. The direct labour cost totalled $29,580 for the month. Required: 1-a. What direct labour cost should have been incurred to make the 12,000 speakers? (Do not round intermediate calculations.) Direct labour cost 1-b. By how much does direct labour cost differ from the cost that was incurred? (Indicate the effect of variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance).) Total variance

Affordable Electronics Inc. manufactures medium-quality, reasonably priced wireless speakers for home use. The company uses standards to control its costs. The labour standards that have been set for one speaker are as follows: Standard Hours 12 minutes (0.20 hours) Standard Rate per Hour $12.00 Standard Cost $2.40 During July, 2,550 hours of direct labour time were recorded to make 12,000 units. The direct labour cost totalled $29,580 for the month. Required: 1-a. What direct labour cost should have been incurred to make the 12,000 speakers? (Do not round intermediate calculations.) Direct labour cost 1-b. By how much does direct labour cost differ from the cost that was incurred? (Indicate the effect of variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance).) Total variance

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter6: Activity-based, Variable, And Absorption Costing

Section: Chapter Questions

Problem 6PB: Box Springs. Inc., makes two sizes of box springs: queen and king. The direct material for the queen...

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Box Springs. Inc., makes two sizes of box springs: queen and king. The direct material for the queen is $35 per unit and $55 is used in direct labor, while the direct material for the king is $55 per unit, and the labor cost is $70 per unit. Box Springs estimates it will make 4,300 queens and 3,000 kings in the next year. It estimates the overhead for each cost pool and cost driver activities as follows: How much does each unit cost to manufacture?
Rulers Company is a neon sign company that estimated overhead will be $60,000, consisting of 1,500 machine hours. The cost to make Job 416 is $95 in neon, 15 hours of labor at $13 per hour, and five machine hours. During the month, it incurs $95 in indirect material cost, $130 in administrative labor, $320 in utilities, and $350 in depreciation expense. What is the predetermined overhead rate if machine hours are considered the cost driver? What is the cost of Job 416? What is the overhead incurred during the month?
Box Springs, Inc., makes two sizes of box springs: twin and double. The direct material for the twin is $25 per unit and $40 s used in direct labor, while the direct material for the double is $40 per unit, and the labor cost is $50 per unit. Box Springs estimates it will make 5,000 twins and 9,000 doubles in the next year. It estimates the overhead for each cost pool and cost driver activities as follows: How much does each unit cost to manufacture?
SmokeCity, Inc., manufactures barbeque smokers. Based on past experience, SmokeCity has found that its total annual overhead costs can be represented by the following formula: Overhead cost = 543,000 + 1.34X, where X equals number of smokers. Last year, SmokeCity produced 20,000 smokers. Actual overhead costs for the year were as expected. Required: 1. What is the driver for the overhead activity? 2. What is the total overhead cost incurred by SmokeCity last year? 3. What is the total fixed overhead cost incurred by SmokeCity last year? 4. What is the total variable overhead cost incurred by SmokeCity last year? 5. What is the overhead cost per unit produced? 6. What is the fixed overhead cost per unit? 7. What is the variable overhead cost per unit? 8. Recalculate Requirements 5, 6, and 7 for the following levels of production: (a) 19,500 units and (b) 21,600 units. (Round your answers to the nearest cent.) Explain this outcome.
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Brees, Inc., a manufacturer of golf carts, has just received an offer from a supplier to provide 2,600 units of a component used in its main product. The component is a track assembly that is currently produced internally. The supplier has offered to sell the track assembly for 66 per unit. Brees is currently using a traditional, unit-based costing system that assigns overhead to jobs on the basis of direct labor hours. The estimated traditional full cost of producing the track assembly is as follows: Prior to making a decision, the companys CEO commissioned a special study to see whether there would be any decrease in the fixed overhead costs. The results of the study revealed the following: 3 setups1,160 each (The setups would be avoided, and total spending could be reduced by 1,160 per setup.) One half-time inspector is needed. The company already uses part-time inspectors hired through a temporary employment agency. The yearly cost of the part-time inspectors for the track assembly operation is 12,300 and could be totally avoided if the part were purchased. Engineering work: 470 hours, 45/hour. (Although the work decreases by 470 hours, the engineer assigned to the track assembly line also spends time on other products, and there would be no reduction in his salary.) 75 fewer material moves at 30 per move. Required: 1. Ignore the special study, and determine whether the track assembly should be produced internally or purchased from the supplier. 2. Now, using the special study data, repeat the analysis. 3. Discuss the qualitative factors that would affect the decision, including strategic implications. 4. After reviewing the special study, the controller made the following remark: This study ignores the additional activity demands that purchasing would cause. For example, although the demand for inspecting the part on the production floor decreases, we may need to inspect the incoming parts in the receiving area. Will we actually save any inspection costs? Is the controller right?
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Affordable Electronics Inc. manufactures medium-quality, reasonably priced wireless speakers for home use. The company uses standards to control its costs. The labour standards that have been set for one speaker are as follows: Standard Rate Standard per Hour $19.00 Standard Hours Cost 12 minutes (0.20 hours) $3.80 During July, 3,850 hours of direct labour time were recorded to make 18,000 units. The direct labour cost totalled $74,305 for the month.