Lane Company manufactures a single product that requires a great deal of hand la

Question

Lane Company manufactures a single product that requires a great deal of hand labor. Overhead cost is applied on the basis of standard direct labor-hours. The budgeted variable manufacturing overhead is $5.80 per direct labor-hour and the budgeted fixed manufacturing overhead is $3,087,000 per year. The standard quantity of materials is 4 pounds per unit and the standard cost is $12.50 per pound. The standard direct labor-hours per unit is 1.5 hours and the standard labor rate is $13.90 per hour, The company planned to operate at a denominator activity level of 315,000 direct labor-hours and to produce 210,000 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 252,000 409,500 $1,351,350 $3,276,000 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 the underapplied or overapplied overhead from (3) above by computing the variable overhead rate and efficiency variances and the fixed overhead budget and volume variances Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req 3A Req 3B Req 4 Compute the predetermined overhead rate for the year. Break the rate down into variable and fixed elements. (Round your answers to 2 decimal places.)

Explanation / Answer

1 Predetermined overhead rate=Budgeted manufacturing overhead/Budgeted direct labor hours Budgeted manufacturing overhead: Variable maniufacturing overhead 1827000 (315000*5.80) Fixed maniufacturing overhead 3087000 Total budgeted manufacturing overhead 4914000 Predetermined overhead rate=Budgeted manufacturing overhead/Budgeted direct labor hours=4914000/315000=$15.6 per direct labor hour Variable manufacturing overhead rate=$5.80 per direct labor hour Fixed manufacturing overhead=Budgeted fixed manufacturing overhead/Budgeted direct labor hours=3087000/315000=$9.8 per direct labor hour 2 Standard cost card: $ Direct materials 4 Pounds at 12.5 per pound 50 Direct labor 1.5 DLHs at 13.9 per DLH 20.85 Variable overhead 1.5 DLHs at 5.8 per DLH 8.7 Fixed overhead 1.5 DLHs at 9.8 per DLH 14.7 Standard cost per unit 94.25 3a. Standard direct labor-hours allowed for the year's production=Actual number of units produced*standard direct labor-hours per unit=252000*1.5=$ 378000 3b. Manufacturing overhead Particulars Debit Particulars Credit Variable manufacturing overhead 1351350 Applied manufacturing overhead 6388200 Fixed manufacturing overhead 3276000 (409500*15.6) Overapplied overhead 1760850 (Balancing figure) 6388200 6388200

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