for 2010, omaha mechanical has a monthly overhead cost formula of $42,900 + $6 p
ID: 2365305 • Letter: F
Question
for 2010, omaha mechanical has a monthly overhead cost formula of $42,900 + $6 per direct labor hour. The firm's 2010 expected annual capacity is 78,000 direct labor hours, to be incurred evenly each month. Making one hit of the company's product requires 1.5 direct labor hours.the Overhead per unit of product is $4.37 per unit
b) prepare journal entries to record the application of overhead to work in process inventory and the incurrence of $128,550 of actual overhead in january 2010, when 6,390 direct hours were worked.
Explanation / Answer
Annual DL hrs = 78000 SO Monthly DL hrs budgeted = 78000/12 = 6500 So Budgeted Monthly OH = $42900+$6*6500 = $81900 So Std Lab Hr Rate = 81900/6500 = $12.60 per DL Hr Direct Labor Rate Variance (DLRV) Formula: [Labor rate variance = (Actual hours worked × Actual rate) - (Actual hours worked × Standard rate)] ie DLRV = (6390*$128550/6390) - (6390*12.60) = $48,036 = $48036U Formula of labor efficiency variance (LEV) : [Labor efficiency variance = (Actual hours worked × Standard rate) - (Standard hours allowed × Standard rate)] ie LEV = (6390*$12.60) - (6500*$12.60) = $(1,386.00) = 1386F Jan'10 Factory Labor Dr 80,514 Direct Labor Rate Variance Dr 48036 Wages Payable Cr 128,550 Record Direct Labor rate variance Jan'10 Work-in-Process Inventory Dr 81900 Direct Labor Efficiency Variance Cr 1386 Factory Labor Cr 80514 Assign Direct Labor eff var to Work-in Process Inventory
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