Problem 10A-12 Selection of a Denominator; Overhead Analysis; Standard Cost Card [LO10-3, LO10-4]

Morton Companys budgeted variable manufacturing overhead is $2.50 per direct labor-hour and its budgeted fixed manufacturing overhead is $180,000 per year.

The company manufactures a single product whose standard direct labor-hours per unit is 2.5 hours. The standard direct labor wage rate is $10 per hour. The standards also allow 3 feet of raw material per unit at a standard cost of $7 per foot.

Although normal activity is 60,000 direct labor-hours each year, the company expects to operate at a 50,000-hour level of activity this year.

Required:

1. 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.

2. Assume that the company chooses 60,000 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 50,000 & 60,000 DLHs.

4. Assume that the company actually produces 21,200 units and works 54,000 direct labor-hours during the year. Actual manufacturing overhead costs for the year are:

Variable manufacturing overhead cost	$	136,000
Fixed manufacturing overhead cost		181,500
Total manufacturing overhead cost	$	317,500

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

b. Complete the Manufacturing Overhead T-account below. Assume that the company uses 50,000 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 50,000 direct labor-hours (normal activity) as the denominator activity figure in computing predetermined overhead rates, as you have done in requirement (1).

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. (Round your answers to 2 decimal places.)

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

Assume that the company chooses 60,000 direct labor-hours as the denominator level of activity. Compute the predetermined overhead rate, breaking it down into variable and fixed cost elements. (Round your answers to 2 decimal places.)

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

Assume that the company chooses 60,000 direct labor-hours as the denominator level of activity. Compute the predetermined overhead rate, breaking it down into variable and fixed cost elements. (Round your answers to 2 decimal places.)

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

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

Standard hours allowed for this year's production

Complete the Manufacturing Overhead T-account below. Assume that the company uses 50,000 direct labor-hours (normal activity) as the denominator activity figure in computing predetermined overhead rates, as you have done in requirement (1).

Manufacturing Overhead

Complete the Manufacturing Overhead T-account below. Assume that the company uses 50,000 direct labor-hours (normal activity) as the denominator activity figure in computing predetermined overhead rates, as you have done in requirement (1).

Manufacturing Overhead