Final answer:
The student is asking about calculating factory overhead costs and understanding variances due to economies of scale. Specific details for the variance calculation were not provided, but examples demonstrate that as production scales up, the average cost per product decreases.
Step-by-step explanation:
The concept being explored in the student's question is the calculation of factory overhead and the analysis of variances in cost based on economies of scale. In the context provided, Munoz Manufacturing Co. is projected to produce a certain number of units of product X each month, with each unit requiring a set number of hours of direct labor. The student is interested in calculating the overhead costs and understanding how production volume impacts these costs due to economies of scale.
If workers receive $10 per hour, the cost of labor for producing different levels of output can be determined by multiplying the number of workers (or labor hours) by this hourly rate. To illustrate economies of scale, as the quantity of production increases, the average cost per product tends to decrease as in the example where a small factory produces 1,000 alarm clocks at $12 each, a medium factory produces 2,000 clocks at $8 each, and a large factory produces 5,000 clocks at $4 each.
To calculate factory overhead variances, a manager would typically compare the actual overhead costs to the budgeted or standard overhead costs. This involves determining the fixed and variable components of overhead and considering the actual output level. The student's initial question lacked complete information necessary to perform the exact variance calculations.