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

Question

Lane Company manufactures a single product that requires great deal of hand labor. Overhead cost is applied on the basis of standard direct labor-hours. Variable manufacturing overhead should be $2.40 per standard direct labor-hour and foxed manufacturing overhead should be $384,000 per year The company's product requires 4 pounds of material that has a standard cost of $4.00 per pound and 1.5 hours of direct labor time that has a standard rate of $12.20 per hour The company planned to operate at a denominator activity level of 60,000 direct labor-hours and to produce 40,000 units of product during the most recent year. Actual activity and costs for the year were as follows: Number of units produced Actual direct labor-hours worked Actual variable manufacturing overhead cost incurred Actual fioxed manufacturing overhead cost incurred 48,000 $124,800 $ 429,000 12000 overhoead cntin Required: 1. Compute the predetermined overhead rate for the year. Break the rate down into variable and fixed elements. (Round your answers to 2 decimal places.) 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 Direct materials Direct labor Variable overhead Fixed overhead Standard cost per unit pounds at DLHs at DLHs at DLHs at per pound per DLH per DLH per DLH

Explanation / Answer

1) Predetermined overhead rate Variable manufacturing overhead 2.4 Fixed manufacturing overhead (384000/60000)= 6.4 predetermined overhead rate 8.8 $8.80 per direct labor hours 2) Standard cost card $ Direct materials (4 pounds *$4 per pound) 16 Direct labor (1.5 hours *$12.2 per hour) 18.3 Variable overhead rate (1.5 hours * $2.4 per hour) 3.6 fixed overhead rate (1.5 hours *$6.4per hour) 9.6 Standard cost per unit 47.5 3)-a) Standard direct labor hours allowed for Actual production * standard direct labor hr per unti 48,000*1.5 72000 hrs answer 3-b)       Manufacturing overhead Actual variable overhead 124,800 Applied VOH (72000*2.4) 172800 Actual fixed overhead 429,000 Applied FOH (72000*6.4)) 460800 overhead overapplied 79,800 Variable overhead rate variance (Actual rate - standard rate )*Actual hours (124,800 - 2.4*78000) 62,400 F Variable overhead Efficiency variance (Actual hours - standard hours )*Standard rate (78000- 72000)*2.4 14400 U fixed overhead budget variance Actual fixed overhead - budgeted fixed overhead (429000-384000 45000 U Fixed overhead volumevariance (Budgeted fixed overhead -standard hrs allowed *std rate) (384000-72000*6.4) 76,800 F

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