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. The budgeted variable manufacturing overhead is $5.80 per direct labor-hour and the budgeted fixed manufacturing overhead is $3,087,000 per year.

The standard quantity of materials is 4 pounds per unit and the standard cost is $12.50 per pound. The standard direct labor-hours per unit is 1.5 hours and the standard labor rate is $13.90 per hour.

The company planned to operate at a denominator activity level of 315,000 direct labor-hours and to produce 210,000 units of product during the most recent year. Actual activity and costs for the year were as follows:

Actual number of units produced		252,000
Actual direct labor-hours worked		409,500
Actual variable manufacturing overhead cost incurred	$	1,351,350
Actual fixed manufacturing overhead cost incurred	$	3,276,000

Required:

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

Predetermined overhead rate		per DLH
Variable rate		per DLH
Fixed rate		per DLH

2. Prepare a standard cost card for the companys product.

Direct materials		pounds at		per pound
Direct labor		DLHs at		per DLH
Variable overhead		DLHs at		per DLH
Fixed overhead		DLHs at		per DLH
Standard cost per unit

3a. Compute the standard direct labor-hours allowed for the years production.

3b. 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.

Variable overhead rate variance
Variable overhead efficiency variance
Fixed overhead budget variance
Fixed overhead volume variance