Question
Problem 10A-8 (Algo) Applying Overhead; Overhead Variances [LO10-3, LO10-4] Lane Company manufactures a single product requiring a great deal of hand labor. Overhead cost
Problem 10A-8 (Algo) Applying Overhead; Overhead Variances [LO10-3, LO10-4] Lane Company manufactures a single product requiring a great deal of hand labor. Overhead cost is applied based on standard direct labor-hours. The budgeted variable manufacturing overhead is $2.80 per direct labor-hour and the budgeted fixed manufacturing overhead is $612,000 per year. The standard quantity of materials is 4 pounds per unit and the standard cost is $5.00 per pound. The standard direct labor-hours per unit is 1.5 hours and the standard labor rate is $12.40 per hour. The company planned to operate at a denominator activity level of 90,000 direct labor-hours and to produce 60,000 units during the most recent year. Actual activity and costs for the year were as follows: Actual number of units produced Actual direct labor-hours worked Actual variable manufacturing overhead cost incurred Actual fixed manufacturing overhead cost incurred Required: 72,000 117,000 $ 210,600 $ 643,500 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 company's product. 3a. Compute the standard direct labor-hours allowed for the year's 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. Required 1 Required 2 Required 3A Required 3B Required 4 Compute the predetermined overhead rate for the year. Break the rate down into variable and fixed elements. Note: Round your answers to 2 decimal places. Predetermined overhead rate Variable rate Fixed rate per DLH per DLH per DLH Required 1 Required 2 Required 3A Required 3B Required 4 Prepare a standard cost card for the company's product. Note: Round your answers 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 Required 1 Required 2 Required 3A Required 3B Required 4 Compute the standard direct labor-hours allowed for the year's production. Standard direct labor hours Required 1 Required 3B Required 2 Required 3A Required 3B Required 4 Complete the following Manufacturing Overhead T-account for the year. Debit Manufacturing Overhead Credit Required 1 Required 2 Required 3A Required 3B Required 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. Note: Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values. Variable overhead rate variance Variable overhead efficiency variance Fixed overhead budget variance Fixed overhead volume variance Show less
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