Accounting 225 Quiz Section #12

Chapter 10A Class Exercises

1. Lincoln Company uses a standard cost system where manufacturing overhead expense is
applied on the basis of direct labor hours. Management is trying to determine if the company did
a good job controlling fixed overhead costs last month and the following information is
available. Actual unit production was 1,100 units and actual direct labor hours were 4,500 hours.
Standards state that it takes 4 direct labor hours to make one unit. The predetermined overhead
application rate for Lincoln is $15 per direct labor hour. Last month the production volume
variance (PVV) was $6,000 favorable and the total fixed overhead variance was $3,000
favorable.
a) How much fixed overhead cost was applied last month?

b) What was the planned level of unit output?

c) How much was the actual fixed overhead expense and what was the spending variance?

d) Did management do a good job controlling cost?

Accounting 225 Quiz Section #12

Chapter 10A Class Exercises
2. Sucher Company uses a standard cost system in which manufacturing overhead costs are
applied to units of product on the basis of standard machine-hours. The company's standards are
based on variable manufacturing overhead of $3 per machine-hour and fixed manufacturing
overhead of $300,000 per year. The denominator level of activity is 30,000 machine-hours.
Standards call for 2.5 machine-hours per unit of output. Actual activity and manufacturing
overhead costs for the year are given below:

a) What are the standard hours allowed for the output?

b) What was the variable overhead rate variance?

c) What was the variable overhead efficiency variance?

d) What was the fixed manufacturing overhead budget variance?

e) What was the fixed manufacturing overhead volume variance?