# The company expects to operate at 25000 direct labor

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Chapter 12 / Exercise 9
Cornerstones of Cost Management
Hansen/Mowen
Expert Verified
The cost functions are considered reliable within a relevant range of 20,000 to 40,000 direct labor hours. The company expects to operate at 25,000 direct labor hours per month.Information for the month of June is as follows:Actual overhead costs incurred:Indirect materials\$ 20,000Indirect labor30,000
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Chapter 12 / Exercise 9
Cornerstones of Cost Management
Hansen/Mowen
Expert Verified
Utilities12,000Insurance11,000Depreciation40,000Total\$113,000Actual direct labor hours worked:24,000Standard direct labor hours allowed for production achieved:27,000Required:A.Calculate the following overhead rates based upon expected capacity:1. Variable overhead2. Fixed overhead rate3. Total overhead rateB.Calculate the following variances:1. Variable overhead spending variance2. Variable overhead efficiency variance3. Fixed overhead spending variance4. Fixed overhead volume variance154. Figure 11-8.Booth Inc. uses three delivery trucks to transport finished parts from its plant to the plants of its customers. The delivery trucks are obtained through a five-year operating lease that costs \$12,000 per year per truck. Booth employs 6 drivers who receive an average salary of \$36,000 per year, including benefits. Parts are placed in boxes and placed in the trucks. Each truck holds 20 boxes. The average round-trip distance for a delivery is 40 miles. The boxes are retained by the customers. Each box costs \$2.00. Fuel for the trucks costs \$1.80 per gallon. A gallon of gas is used every 20 miles. A driver can travel 160 miles in an eight-hour shift. Each driver works 40 hours per week and 50 weeks per year. Refer to Figure 11-8. Prepare an annual budget forthe activity, assuming that all of the capacity of the activity is used (use miles as the activity driver). Identify which resources you would treat as fixed costs and which would be viewed as variable costs. 155. Figure 11-8.Booth Inc. uses three delivery trucks to transport finished parts from its plant to the plants of its customers. The delivery trucks are obtained through a five-year operating lease that costs \$12,000 per year per truck. Booth employs 6 drivers who receive an average salary of \$36,000 per year, including benefits. Parts are placed in boxes and placed in the trucks. Each truck holds 20 boxes. The average round-trip distance for a delivery is 40 miles. The boxes are retained by the customers. Each box costs \$2.00. Fuel for the trucks costs \$1.80 per gallon. A gallon of gas is used every 20 miles. A driver can travel 160 miles in an eight-hour shift. Each driver works 40 hours per week and 50 weeks per year. Refer to Figure 11-8. Assume that the company uses only 90 percent of the activity capacity. The actual costs incurred at this level were: