Posted: April 5th, 2016

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

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

The company incurred the following actual costs when it operated at 75% of capacity in October.

Direct materials (46,000 Ibs. @ $5.20 per lb.) $ 239,200
Direct labor (31,000 hrs. @ $14.40 per hr.) 446,400
Overhead costs
Indirect materials $ 43,750
Indirect labor 176,750
Power 17,250
Repairs and maintenance 34,500
Depreciation – building 23,000
Depreciation – machinery 98,550
Taxes and insurance 18,000
Supervision 220,750 632,550
Total costs $ 1,318,150

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