Lane Company manufactures a single product and applies overhead cost to that pro

Question

Lane Company manufactures a single product and applies overhead cost to that product using standard direct labor-hours. The budgeted variable manufacturing overhead is $4.80 per direct labor-hour and the budgeted fixed manufacturing overhead is $2,112,000 per year The standard quantity of materials is 4 pounds per unit and the standard cost is $10.00 per pound. The standard direct labor-hours per unit is 1.5 hours and the standard labor rate is $13.40 per hour. The company planned to operate at a denominator activity level of 240,000 direct labor-hours and to produce 160,000 units of product during the most recent year. Actual activity and costs for the year were as follows Actual number of units produced Actual direct labor-hours worked Actual variable manufacturing overhead cost incurred Actual fixed manufacturing overhead cost incurred 192,000 312,000 $ 873,600 $2,184,000 Required 1. Compute the predetermined overhead rate for the year. Break the rate down into variable and fixed elements. 2. Prepare a standard cost card for the company's product. 3a. Compute the standard direct labor-hours allowed for the year's production. 3b. Complete the following Manufacturing Overhead T-account for the year 4. Determine the reason for any underapplied or overapplied overhead for the year by computing the variable overhead rate and efficiency variances and the fixed overhead budget and volume variances.

Explanation / Answer

ans 1 predetermined overhead rate 13.60 per DLH 4.8+(2112000/240000) Variable rate $4.80 Fixed rate 2112000/240000 8.80 ans 2 Direct material 4 pounds at $10 per pound $40 Direct Labor 1.5 DLh at 13.4 per DLH $20.10 Variable overhread 1.5 DLh at $4.80 per DLH $7.20 Fixed overhead 1.5 DLh at 8.80 per DLH $13.20 Standard cost per unit $80.50 ans 3 Standrd DLH allowed 288000 192000*1.5 3b Manufacturing overhead Actual variable manufacturing overhead 873600 Applied variable manufacturing overhead (288000*4.8) $1,382,400 Actual fixed manufacturing overhead 2184000 Applied fixed manufacturing overhead 2534400 end bal $859,200 ans 4 Variable overhead rate variance 624000 F 873600-(312000*4.8) -624000 Variable overhead efficiency variance 115200 U 4.8*(312000-288000) Fixed overhead budgte variance 72000 U 2184000-2112000 Fixed overhead volume variance 422400 F 2112000-2534400 -422400 If any doubt please comment

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