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    Fixed and Variable Costs.

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    Assume the following standard cost information:
    Standard cost per unit
    Direct materials 10 components at $0.41 per unit 4.10
    Direct labor 25 units produced per DLH at $37.50 1.50
    VOH $27 per DLH 1.08
    Fixed OH Per DLH $57.48 2.30
    Standard cost per unit 8.98

    Actual information for the year is provided below
    Actual production: 2,730,000 units
    Actual direct material purchased: 28,000,000 components at actual cost of $0.43 per component
    Actual direct materials used: 26,361,000 components
    Actual direct labor hour used: 103,000 hours paying $38.00 per hour.
    Actual variable overhead: $ 2,940,000
    Actual fixed overhead: $ 6,000,000

    a. Prepare the material usage variance, the direct labor variances and the overhead variances.
    b. Prepare the material price variance.
    c. After computing the individual variances, are there any variances that need to be investigated given the assumption that any variance in excess of 1% should be investigated? Explain.
    d. For the variances computed, discuss the potential causes of the variances and the departments responsible for the variances.

    6. The usefulness of standard costing is being challenged in recent years. There are those who claim that its usefulness is an impediment in the advanced manufacturing environment that many feel is vital in today's competitive environment. Discuss the role and the value of standard costing in today's manufacturing environment. Be sure to address the following questions:
    a. What are the major criticisms of standard costing?
    b. What are the major advantages, if any, of standard costing?

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    Solution Summary

    The expert prepares the material usage variance, direct labor variance and overhead variances are determined. The response addresses the query is posted in excel file attached with APA references.

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