106) The Fenmore Company uses standard costing for direct materials and direct labour. Management would like to use standard costing for variable and fixed overhead also.

The following monthly cost functions were developed for manufacturing overhead items:

OVERHEAD ITEMCOST FUNCTION

Indirect materials$0.10 per DLH

Indirect labour$0.40 per DLH

Repairs and maintenance$0.20 per DLH

Utilities$0.25 per DLH

Insurance$  2,000

Rent$  4,000

Depreciation$20,000

The cost functions are considered reliable within a relevant range of 30,000 to 55,000 direct labour hours.

Fenmore expects to operate at 40,000 direct labour hours per month.

Information for the month of September is as follows:

Actual Overhead Costs Incurred:

Indirect materials$  4,500

Indirect labour17,000

Repairs and maintenance8,000

Utilities10,000

Insurance2,100

Rent4,000

Depreciation      20,000

Total$65,600

Actual direct labour hours worked42,000

Standard direct labour hours

allowed for production achieved:44,000

a. Calculate the standard manufacturing overhead rate based upon expected capacity showing the

     breakdown between the fixed overhead rate and the variable overhead rate.

b. Calculate the variable manufacturing overhead spending variance.

c. Calculate the variable manufacturing overhead efficiency variance.

d. Calculate the fixed manufacturing overhead budget variance.



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