Lane Company manufactures a single product that requires a great deal of hand la
ID: 2528331 • Letter: L
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. Variable manufacturing overhead should be $4.40 per standard direct labor-hour and fixed manufacturing overhead should be $1,764,000 per year. The company's product requires 4 pounds of material that has a standard cost of $9.00 per pound and 1.5 hours of direct labor time that has a standard rate of $13.20 per hour The company planned to operate at a denominator activity level of 210,000 direct labor-hours and to produce 140,000 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 fixed manufacturing overhead cost incurred 168,000 273,000 $ 709,800 $1,911,000 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.) 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 $ 0.00 per DLH per DLH per DLHExplanation / Answer
Solution 1:
Solution 2:
Solution 3a:
Standard Direct labor hours allowed for the production = Actual Production units * Standard hours per unit = 168000* 1.5 = 2,52,000 hours
Solution 3b:
Solution 4:
Standard direct labor hours for actual production = 252,000 hours
Actual direct labor hours = 273,000 hours
Standard variable overhead rate = $4.4 per hour
Actual variable overhead rate = $709800/ 273000 = $2.60 per hour
Variable Overhead Rate Variance = = (SR – AR) * AH = ($4.4-$2.6) * 273,000 = $491,400 F
Variable overhead efficiency variance = (SH – AH) * SR = (252,000- 273,000) * $4.4 = $92,400 U
Fixed Overhead budget Variance = Actual Fixed Overhead - budgeted fixed overhead = $1,911,000 - $1,764,000 = $147,000 F
Fixed overhead volume variance = Budgeted fixed overhead - (Standard hours for actual production * Standard rate) = $1,764,000 - (252,000* 8.40) = $352,800 U
Total Variable overhead variance = $491,400 F + ($92400 U) = $399,000
Total Fixed overhead Variance = $147,000 F + ($352,800 U) = $205800
Total OH Variance = $399000+ $ 205800 = $604,800
Computation of Predetermined overhead rate - Lane Company Particulars Amount Budgeted variable manufacturing overhead ($4.40 * 210000) $924,000.00 Budgeted fixed manufacturing overhead $1,764,000.00 Total Manufacturing overhead $2,688,000.00 Budgeted direct labor hours $210,000.00 Predetermined overhead rate $12.80 Variable overhead rate (Per direct labor hour) $4.40 Fixed manufacturing overhead rate (per direct labor hour) $8.40Related Questions
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