Wymont Company produces a single product that requires a large amount of labor t

Question

Wymont Company produces a single product that requires a large amount of labor time. Overhead cost is applied on the basis of standard direct labor-hours. Variable manufacturing overhead should be $3.60 per standard direct labor-hour and fixed manufacturing overhead should be $1,140,000 per year.

     The company’s product requires 4 feet of direct material that has a standard cost of $7.00 per foot. The product requires 1.5 hours of direct labor time. The standard labor rate is $12.80 per hour.

     During the year, the company had planned to operate at a denominator activity level of 150,000 direct labor-hours and to produce 100,000 units of product. Actual activity and costs for the year were as follows:

Compute the predetermined overhead rate for the year. Break the rate down into variable and fixed components. (Round your answers to 2 decimal places.)

Wymont Company produces a single product that requires a large amount of labor time. Overhead cost is applied on the basis of standard direct labor-hours. Variable manufacturing overhead should be $3.60 per standard direct labor-hour and fixed manufacturing overhead should be $1,140,000 per year.

Explanation / Answer

Total Per unit Budgeted Units                 100,000 Budgeted DLH                 150,000                                                       1.50 Variable OH Rate /DLH                        3.60 DLH /unit                              2 Variable OH /Unit Fixed OH/year              1,140,000 Fixed OH/DLH                        7.60 1 Predetrmined OH rate Variable OH                        3.60 per DLH Fixed OH                        7.60 per DLH Total OH                      11.20 per DLH Actual Std for Actual output Actual Output                 120,000 Actual DLH                 195,000                                                180,000 Actual VarMfg OH cost                 429,000                                                648,000 Actual Var Mfg OH/DLH                        2.20                                                       3.60 Actual Fixed Mfg OH cost              1,170,000                                             1,368,000 2 standard cost Card Qty Rate Amt Direct Materials                              4 feet at                                7 per feet               28 Direct Labor                        1.50 DLH at                       12.80 per DLH         19.20 Variable OH                        1.50 DLH at                          3.60 per DLH           5.40 Fixed OH                        1.50 DLH at                          7.60 per DLH         11.40 Standard cost per unit                        8.50         64.00 3a. Std Direct labor hour for years production =                                          180,000.00 3b. Manufacturing Overhead T Account Details Amt $ Details Amt $ Actual Var Mfg OH Incurred                 429,000 Actual Var Mfg OH applied                   648,000 Actual Fixed Mfg OH incurred              1,170,000 Actual Fixed Mfg OH applied               1,368,000 Over applied avr mfg OH                 219,000 Over applied Fixed mfg OH                 198,000 Total              2,016,000               2,016,000 Variable OH rate Variance= Actual Var Oh Hrs( Actual rate-Std rate)                 273,000 F Variable OH efficiency Var= Variable OH std rate( Actual Hrs-Std hrs for actual output)                    54,000 U                   219,000 Fixed OH Budget Variance =Actual fixed OH -Budgeted Fixed OH Cost                    30,000 U Fixed OH Vol Variance =Budgeted Fixed OH -Applied Fixed OH                 228,000 F Total                 417,000 F In vol variance the sign is considered reverse than other variances

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