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    Main Company Problems

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    Main Company uses a standard cost system in which it applies manufacturing overhead to its product on the basis of standard direct labor-hours (DLHs). Below is the standard cost card for the product:

    Direct materials, 5 feet at $4.00 per foot......................... $20.00
    Direct labor, 2.0 DLHs at $10.00 per DLH......................... 20.00
    Variable overhead, 3.0 DLHs at $2.00 per DLH............... 6.00
    Fixed overhead, 3.0 DLHs at $8.00 per DLH................... 24.00
    $70.00
    Last year, the company produced 6,000 units of product using 17,000 direct labor-hours. The actual total fixed overhead cost for the year was $140,000 and the volume variance was $12,000, favorable.
    Required:
    a. Compute the total fixed overhead cost that was originally budgeted.
    b. Compute the denominator activity figure that the company used in computing predetermined overhead rates

    © BrainMass Inc. brainmass.com June 3, 2020, 7:19 pm ad1c9bdddf
    https://brainmass.com/business/accounting/main-company-problems-93629

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    STEP 1

    We use the figures to compute (b) first.
    We know that:
    Volume variance = favorable units of production X fixed overhead.
    Or 12,000 = favorable units of production X $24
    So, the favorable units of production is ...

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