Exercise 10A-6 Predetermined Overhead Rate [L010-4] Lasser Company plans to prod

Question

Exercise 10A-6 Predetermined Overhead Rate [L010-4] Lasser Company plans to produce 27,000 units next period at a denominator activity of 81,000 direct labor-hours. The direct labor wage rate is $12.00 per hour. The company's standards allow 2 yards of direct materials for each unit of product, the material costs $7.80 per yard. The company's budget includes variable manufacturing overhead cost of $2.20 per direct labor-hour and fixed manufacturing overhead of $526,500 per period. Required 1. Using 81,000 direct labor-hours as the denominator activity, compute the predetermined overhead rate and break it down into variable and fixed elements 2. Complete the standard cost card below for one unit of product.

Explanation / Answer

Required 1 predetermined overhead rate 8.7 per DLH Variable element 2.2 per DLH Fixed element 6.5 per DLH ( fixed = 526500/81000 = $6.5 per DLH) Required 2 Standard Standard Standard Qty or price or Cost Hours Rate Inputs Direct materials 2 yards $7.8per yard 15.6 Direct labor 3 hrs $12 per hr 36 Variable manufacturing overhead 3 hrs $2.2per DLH 4.4 Fixed manufacturing overhead 3 hrs $6.5per DLH 19.5 Total standard cost per unit 75.5 Direct labor hours per unit = 81000/27000= 3

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