Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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.

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 $2.40 per direct labor-hour and the budgeted fixed manufacturing overhead is $384,000 per year.

The standard quantity of materials is 4 pounds per unit and the standard cost is $4.00 per pound. The standard direct labor-hours per unit is 1.5 hours and the standard labor rate is $12.20 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:

Actual number of units produced 48,000
Actual direct labor-hours worked 78,000
Actual variable manufacturing overhead cost incurred $ 124,800
Actual fixed manufacturing overhead cost incurred $ 429,000

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 companys product.

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.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

CIA Part 1 Essentials Of Internal Auditing Certified Internal Auditor 2019

Authors: Muhammad Zain

1st Edition

1091949182, 978-1091949188

More Books

Students also viewed these Accounting questions