Loi Corporation manufactures a single product. The standard cost per unit of
product is as follows.
Direct materials—2 pounds of plastic at $5 per pound
Direct labor—2 hours at $12 per hour
Variable manufacturing overhead
Fixed manufacturing overhead
Total standard cost per unit
The master manufacturing overhead budget for the month based on normal productive
capacity of 20,000 direct labor hours (10,000 units) shows total variable costs of $80,000
($4 per labor hour) and total fixed costs of $60,000 ($3 per labor hour). Normal produc-
tive capacity is 20,000 direct labor hours. Overhead is applied on the basis of direct
labor hours. Actual costs for November in producing 9,800 units were as follows.
Direct materials (20,500 pounds)
Direct labor (19,600 hours)
Total manufacturing costs
The purchasing department normally buys the quantities of raw materials that are ex-
pected to be used in production each month. Raw materials inventories, therefore, can
(a) Compute all of the materials and labor variances.
(b) Compute the total overhead variance.
Malik Manufacturing Company uses a standard cost accounting system to ac-
count for the manufacture of exhaust fans. In July 2011, it accumulates the following
data relative to 1,800 units started and finished.
Cost and Production Data
Manufacturing overhead was applied on the basis of direct labor hours. Normal capac-
ity for the month was 3,400 direct labor hours. At normal capacity, budgeted overhead
costs were $20 per labor hour variable and $9 per labor hour fixed. Total budgeted fixed
overhead costs were $30,600.
Jobs finished during the month were sold for $280,000. Selling and administrative