La-Z Co. applies overhead on the basis of direct labor hours. Selected data from
ID: 2430601 • Letter: L
Question
La-Z Co. applies overhead on the basis of direct labor hours. Selected data from La-Z’s second quarter budgets appear below:
Production Budget: 17,000 units to be produced
Direct Labor Budget – 1.5 labor hours to produce a single unit
Overhead Budget: $153,000 of fixed overhead cost
Actual data for the second quarter is as follows:
Units produced: 20,000
Labor hours worked: 30,500
Actual Fixed Overhead cost: $148,000
a. The total estimated labor hours for the second quarter would be hours.
b. The budgeted fixed overhead rate per direct labor hour is $ per direct labor hour.
c. The standard quantity of labor hours allowed for a single unit is hours.
d. The fixed overhead spending variance is $
Explanation / Answer
a)total estimated labor hours for the second quarter = Actual output *standard hours per unit
= 20000*1.5
= 30000 hours
b)budgeted fixed overhead rate per direct labor hour =Fixed overhead /estimated direct labor hours
= 153000/(17000*1.5)
= 153000 / 25500
= $ 6 per DLH
C)standard quantity of labor hours allowed for a single unit = 1.5 hours per unit
d)fixed overhead spending variance = Actual overhead -budgeted fixed overhead
= 148000- 153000
= - 5000F
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