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Morton Company's budgeted variable manufacturing overhead is $3.00 per direct labor-hour and its budgeted fixed manufacturing overhead is $210,000 per year. The company manufactures a
Morton Company's budgeted variable manufacturing overhead is $3.00 per direct labor-hour and its budgeted fixed manufacturing overhead is $210,000 per year. The company manufactures a single product whose standard direct labor-hours per unit is 2.0 hours. The standard direct labor wage rate is $20 per hour. The standards also allow 2 feet of raw material per unit at a standard cost of $8 per foot. Although normal activity is 40,000 direct labor-hours each year, the company expects to operate at a 25,000-hour level of activity this year. Required: 1. Assume that the company chooses 25,000 direct labor-hours as the denominator level of activity. Compute the predetermined overhead rate, breaking it down into variable and fixed cost elements. 2. Assume that the company chooses 40,000 direct labor-hours as the denominator level of activity. Compute the predetermined overhead rate, breaking it down into variable and fixed cost elements. 3. Complete two standard cost cards for 25,000 & 40.000 DLHs. 4. Assume that the company actually produces 18,400 units and works 38,000 direct labor-hours during the year. Actual manufacturing overhead costs for the year are: Variable manufacturing overhead cost Fixed manufacturing overhead cost Total manufacturing overhead cost $ 121,200 215,000 $ 336,200 a. Compute the standard direct labor-hours allowed for this year's production. b. Complete the Manufacturing Overhead T-account below. Assume that the company uses 25,000 direct labor-hours (normal activity) as the denominator activity figure in computing predetermined overhead rates, as you have done in (1) above. C. Assume that the company uses 25,000 direct labor-hours (normal activity) as the denominator activity figure in computing predetermined overhead rates, as you have done in requirement (1)
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