tpx appied on the basis of standard direct labor-hours. Variable manufacturing o
ID: 2478147 • Letter: T
Question
tpx appied on the basis of standard direct labor-hours. Variable manufacturing overhead should be $5.60 per standard direct labor-hour and fixed manufacturing overhead Lane Company manufactures a single product that requires a great deal of hand labor. Overhead cost is per year The company's product requires 4 pounds of matorial that has a standard cost of $12.00 per pound and 1.5 hours of direct labor time that has a standard rate of $13.80 per hour. produce 200,000 units of product during the most recent year. Actual activity and costs for the year follows: The company planned to operate at a denominator activity level of 300,000 direct labor-hours and to during the most recent year. Actual activity and costs for the year were as 240,000 390,000 Number of units produced Actual direct labor-hours worked Actual variable manufacturing overhead cost incurred Actual fixed manufacturing overhead cost incurred $1,248,000 $ 3,120,000 Required: 1. Compute the predetermined overhead rate for the year. Break the rate down into variable and foxed elements. (Round your answers to 2 decimal places) Predetermined overhead rate Variable rate Fixed rate per DLH per DLH per DLH 2 Prepare a standard cost card for the company's product.(Round your answers to 2 decimal places.) Direct materials Direct labor Variable overhead Fixed overhead Standard cost per unit pounds at DLHs at DLHs at DLHs at per pound 0.00 0.00 0.00 0.00 s 0.00 per DLH per DLH per DLH 3a.Compute the standard direct labor-hours allowed for the year's production. direct labor hoursExplanation / Answer
Solution:
1. Predetermined overhead rate = estimated manufacturing overhead / total labour hours
estimated manufacturing overhead = variable cost + fixed cost
=(200,000 units * 105 hours * $5.6 per hour) + 2,880,000
=1,680,000 + 2,880,000 = $4,560,000
Therefore, Predetermined overhead rate = estimated manufacturing overhead / total labour hours
=$4,560,000 / 300,000 = $15.2per labour hour
Variable cost = 1,680,000 / 300,000 = $5.6per labour hour and
Fixed cost = $9.6per labour hour
2.Computation of standard cost per unit:
3.Standard direct labour hours allowed for the year's production:
The standard direct labor hours are 300,000 for 200,000units, or 1.5hr. for 1 unit.
For 240,000 units, the hours are therefore 240,000 * 1.5 = 360,000hours is the Standard direct labour hours.
3b. Manufacturing overhead account:
4. Reason for under or over-applied variance:
Variable overhead rate variance = Actual hours worked x (Actual overhead rate - standard overhead rate)
=390,000 (3.2 - 5.6) = 390,000 * 2.4 = 936,000 F
Variable overhead efficiency variance = Standard overhead rate x (Actual hours - standard hours)
= 5.6 (390,000 - 300,000) = 5.6 * 90,000 = 504,000 U
Fixed Overhead Volume Variance = Budgeted Fixed Overhead - (actual hours * Standard fixed cost)
=2,880,000 - (390,000 * 9.6) = 2,880,000 - 3,744,000 = 864,000 F
Fixed Overhead Budget Variance = Actual Fixed Overhead - Budgeted Fixed Overhead
=3,120,000 - 2,880,000 = 240,000 U
Details Calculation cost per unit Direct material 4pounds * $12per pound 48 Direct labour 1.5hours * $13.80 per hour 20.7 Variable overhead 1.5hours * $5.6 per hour 8.4 Fixed overhead 1.5hours * $9.6 per hour 14.4 Standard cost per unit $91.5Related Questions
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