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 $5.40 per standard direct labor-hour and fixed manufacturing overhead should be $2,679,000 per year. The company’s product requires 4 pounds of material that has a standard cost of $11.50 per pound and 1.5 hours of direct labor time that has a standard rate of $13.70 per hour. The company planned to operate at a denominator activity level of 285,000 direct labor-hours and to produce 190,000 units of product during the most recent year. Actual activity and costs for the year were as follows: Number of units produced 228,000
Actual direct labor-hours worked 370,500
Actual variable manufacturing overhead cost incurred $ 1,148,550
Actual fixed manufacturing overhead cost incurred $ 2,964,000
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 ? per DLH
Variable rate ? per DLH
Fixed rate ? per DLH
2. Prepare a standard cost card for the company’s product. (Round your answers to 2 decimal places.)
Direct materials ? pounds at ? per pound $0.00
Direct labor ? DLHs at ? per DLH 0.00
Variable overhead ? DLHs at ? per DLH 0.00
Fixed overhead ? DLHs at ? per DLH 0.00
Standard cost per unit $0.00
3a. Compute the standard direct labor-hours allowed for the year’s production.
Standard direct labor hours ?
3b. Complete the following Manufacturing Overhead T-account for the year:
Manufacturing Overhead
Actual costs ? ? Applied costs
? ? ? ?
? ? ? ?
? 0 Overapplied overhead
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. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i. e., zero variance).)
Variable overhead rate variance ? F
Variable overhead efficiency variance ? U
Fixed overhead budget variance ? U
Fixed overhead volume variance ? F