Posted: May 3rd, 2016

What is the first business inquiry?

Kwikeze Company set the following standard costs for one unit of its product.

Direct materials ((3.0 Ibs. @ $5.0 per Ib.) $ 15.00
Direct labor (1.7 hrs. @ $14.0 per hr.) 23.80
Overhead (1.7 hrs. @ $18.50 per hr.) 31.45
Total standard cost $ 70.25

The predetermined overhead rate ($18.50 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 $ 15,000
Indirect labor 75,000
Power 15,000
Repairs and maintenance 30,000
Total variable overhead costs $ 135,000
Fixed overhead costs
Depreciation – building 23,000
Depreciation – machinery 73,000
Taxes and insurance 20,000
Supervision 220,750
Total fixed overhead costs 336,750
Total overhead costs $ 471,750