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 $2 per standard direct labor-hour and fixed manufacturing overhead should be $480,000 per year.

The companys product requires 3 pounds of material that has a standard cost of $7 per pound and 1.5 hours of direct labor time that has a standard rate of $12 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	42,000
Actual direct labor-hours worked	65,000
Actual variable manufacturing overhead cost incurred	$123,500
Actual fixed manufacturing overhead cost incurred	$483,000

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. (Round "DLHs" to 2 decimal places.)

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.

	Standard direct labor hours

3b.

Complete the following Manufacturing Overhead T-account for the year:

Manufacturing 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
Variable overhead efficiency variance
Fixed overhead budget variance
Fixed overhead volume variance