Problem 9A-8 Applying Overhead; Overhead Variances [LO9-6, LO9-7]

Lane Company manufactures a single product and applies overhead cost to that product using standard direct labor-hours. The budgeted variable manufacturing overhead is $5.80 per direct labor-hour and the budgeted fixed manufacturing overhead is $3,087,000 per year.

The standard quantity of materials is 4 pounds per unit and the standard cost is $12.50 per pound. The standard direct labor-hours per unit is 1.5 hours and the standard labor rate is $13.90 per hour.

The company planned to operate at a denominator activity level of 315,000 direct labor-hours and to produce 210,000 units of product during the most recent year. Actual activity and costs for the year were as follows:

Actual number of units produced		252,000
Actual direct labor-hours worked		409,500
Actual variable manufacturing overhead cost incurred	$	1,351,350
Actual fixed manufacturing overhead cost incurred	$	3,276,000

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.

Req 1 Req 2 Req 3A Req 3B Req 4 Compute the predetermined overhead rate for the year. Break the rate down into variable and fixed elements. (Round your answers to 2 decimal places.) Predetermined overhead per DLH per DLH per DLH Variable rate Fixed rate Req 2 Complete this question by entering your answers in the tabs below Req 1 Req 2 Req 3A Req 3B Req 4 Compute the standard direct labor-hours allowed for the year's production tandard direct labor hours Req 2 Req 3B Req 1 Req 2 Req 3A Req 3B Req 4 Complete the following Manufacturing Overhead T-account for the year Manufacturing Overhead Req 3A Req4> Req 1 Req 2 Req 3A Req 3B Req 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. (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 Req 3B Req 4