# What do you think of Judy Jackson’s behavior overall?

July 30, 2019
###### Week 6 Cyber Security-Written Assignment
July 30, 2019

ABC Company uses standard costing. The company has two
manufacturing plants, one in California and the other in Michigan.
For the California plant, ABC has budgeted annual output of
8,000,000 units. Standard labor hours per unit are 0.50, and the
variable overhead rate for the California plant is \$6.50 per direct
labor hour. Fixed overhead for the California plant is budgeted at
\$5,000,000 for the year.
For the Michigan plant, ABC has budgeted annual output of
8,400,000 units with standard labor hours also 0.50 per unit.
However, the variable overhead rate for the Michigan plant is \$6.00
per hour, and the budgeted fixed overhead for the year is only
\$4,620,000.
Firm management has always used variance analysis as a
performance measure for the two plants, and has compared the
results of the two plants.
Judy Jackson has just been hired as a new controller for ABC.
Judy is good friends with the Michigan plant manager and wants her
to get a favorable review. Judy suggests allocating the firm’s
budgeted common fixed costs of \$6,300,000 to the two plants, but on
the basis of one-third to the Michigan plant and two-thirds to the
California plant. Her explanation for this allocation base is that
California is a more expensive state than Michigan.
At the end of the year, the California plant reported the
following actual results: output of 7,800,000 using 2,028,000 labor
hours in total, at a cost of \$6,489,600 in variable overhead and
\$5,040,000 in fixed overhead. Actual results for the Michigan plant
are an output of 8,700,000 units using 2,436,000 labor hours with a
variable cost of \$7,551,600 and fixed overhead cost of \$4,800,000.
The actual common fixed costs for the year were \$6,252,000.
1. Compute the budgeted fixed cost per labor hour for the fixed
a. Excluding allocated common fixed costs (10 points)
b. Including allocated common fixed costs (10 points)
2. Compute the variable overhead spending variance and the
variable overhead efficiency variance separately for each plant.
(20 points)
3. Compute the fixed overhead spending and volume variances for
each plant:
a. Excluding allocated common fixed costs (15 points)
b. Including allocated common fixed costs (15 points)
4. Did Judy Jackson’s attempt to make the Michigan plant look
better than the California plant by allocating common fixed costs
work? Why or why not? (10 points)
5. Should common fixed costs be allocated in general when
variances are used as performance measures? Why or why not? (10
points)
6. What do you think of Judy Jackson’s behavior overall? (10
points)

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What do you think of Judy Jackson’s behavior overall? was first posted on July 30, 2019 at 7:38 pm.