Ana Carillo and Associates is a medium-sized company located near a large metropolitan area in the Midwest. The company manufactures cabinets of mahogany, oak, and other fine woods for use in expensive homes, restaurants, and hotels. Although some of the work is custom, many of the cabinets are a standard size.

One such non-custom model is called Luxury Base Frame. Normal production is 1,120 units. Each unit has a direct labor hour standard of 5 hours. Overhead is applied to production based on standard direct labor hours. During the most recent month, only 1,010 units were produced; 5,000 direct labor hours were allowed for standard production, but only 4,500 hours were used. Standard and actual overhead costs were as follows.

Standard

(1,120 units)Actual

(1,010 units)Indirect materials$ 13,600$ 14,000Indirect labor48,90058,000(Fixed) Manufacturing supervisors salaries25,60025,000(Fixed) Manufacturing office employees salaries14,80014,200(Fixed) Engineering costs30,70028,400Computer costs11,40011,400Electricity2,8002,800(Fixed) Manufacturing building depreciation9,1009,100(Fixed) Machinery depreciation3,4003,400(Fixed) Trucks and forklift depreciation1,7001,700Small tools8001,590(Fixed) Insurance570570(Fixed) Property taxes340340 Total$163,710$170,500

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