Acc225 Fundamental Accounting Principles: P24-5A Kwikeze Company set the following standard costs

Fundamental Accounting Principles

Problem 24-5A Flexible budget preparation; computation of materials, labor, and overhead variances; and overhead variance report
Kwikeze Company set the following standard costs for one unit of its product.
Direct materials ((4.5 Ibs. @ $6.0 per Ib.) 27.00
Direct labor (1.5 hrs. @ $12.0 per hr.) 18.00
Overhead (1.5 hrs. @ $16 per hr.) 24.00
Total standard cost 69.00
The predetermined overhead rate ($16 per direct labor hour) is based on an expected volume of 75% of the factory's capacity of 20,000 units per month. Following are the company's budgeted overhead costs per month at the 75% level.
Overhead Budget (75% Capacity)
Variable overhead costs
Indirect materials 22,500
Indirect labor 90,000
Power 22,500
Repairs and maintenance 45,000
Total variable overhead costs 180,000
Fixed overhead costs
Depreciation-building 24,000
Depreciation-machinery 72,000
Taxes and insurance 18,000
Supervision 66,000
Total fixed overhead costs 180,000
Total overhead costs 360,000
The company incurred the following actual costs when it operated at 75% of capacity in October.
Direct materials (69,000 Ibs. @ $6.10 per lb.) 420,900
Direct labor (22,800 hrs. @ $12.30 per hr.) 280,440
Overhead costs
Indirect materials 21,600
Indirect labor 82,260
Power 23,100
Repairs and maintenance 46,800
Depreciation-building 24,000
Depreciation-machinery 75,000
Taxes and insurance 16,500
Supervision 66,000 355,260
Total costs 1,056,600

Required:
1. a) Examine the monthly overhead budget to determine the costs per unit for each variable overhead item and its total per unit costs and b) Examine the monthly overhead budget to identify the total fixed costs per month.
2. Prepare flexible overhead budgets (as in Exhibit 24-12) for October showing the amounts of each variable and fixed cost at the 65%, 75%, and 85% capacity levels.
3. Compute the direct materials cost variance, including its price and quantity variances.(Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values. Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.)
4. Compute the direct labor cost variance, including its rate and efficiency variances.(Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values. Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.)
5. Prepare a detailed overhead variance report (as in Exhibit 24-15) that shows the variances for individual items of overhead. (Leave no cells blank - be certain to enter "0" wherever required. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values. Omit the "$" & "%" signs in your response.)
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