Morton Companys budgeted variable manufacturing overhead is $3.50 per direct labor-hour and its budgeted fixed manufacturing overhead is $400,000 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 $15 per hour. The standards also allow 2 feet of raw material per unit at a standard cost of $5 per foot.

Although normal activity is 50,000 direct labor-hours each year, the company expects to operate at a 40,000-hour level of activity this year.

Required:

1. 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.

2. Assume that the company chooses 50,000 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 as outlined below.

Denominator Activity: 40,000 DLHs 50,000 DLHs Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Total standard cost per unit 0.00 $ 0.00