Lane Company manufactures a single product and applies overhead cost to that product using standard direct labor$-$hours. The budgeted variable manufacturing overhead is $$3\mathrm{.}80$ per direct labor$-$hour and the budgeted fixed manufacturing overhead is $$1,287,000$ per year.

The standard quantity of materials is $4$ pounds per unit and the standard cost is $$7\mathrm{.}50$ per pound. The standard direct labor$-$hours per unit is $1\mathrm{.}5$ hours and the standard labor rate is $$12\mathrm{.}90$ per hour.

The company planned to operate at a denominator activity level of $165,000$ direct labor$-$hours and to produce $110,000$ units of product during the most recent year. Actual activity and costs for the year were as follows:

Actual number of units produced $132,000$

Actual direct labor$-$hours worked $214,500$

Actual variable manufacturing overhead cost incurred $ $493,350$

Actual fixed manufacturing overhead cost incurred $ $1,320,000$

$$ 

 

Required:

$1.$ Compute the predetermined overhead rate for the year. Break the rate down into variable and fixed elements.

$2.$ Prepare a standard cost card for the company$$s product.

$3$a$.$ Compute the standard direct labor$-$hours allowed for the year$$s production.

$3$b$.$ Complete the following Manufacturing Overhead T$-$account for the year.

$4.$ Determine the reason for any underapplied or overapplied overhead for the year by computing the variable overhead rate and efficiency variances and the fixed overhead budget and volume variances.