Lane Company manufactures a single product that requires a great deal of hand labor. Overhead cost is applied on the basis of standard direct labor-hours. The budgeted variable manufacturing overhead is $4.00 per direct labor-hour and the budgeted fixed manufacturing overhead is $1,440,000 per year. The standard quantity of materials is 4 pounds per unit and the standard cost is $8.00 per pound. The standard direct labor-hours per unit is 1.5 hours and the standard labor rate is $13.00 per hour. The company planned to operate at a denominator activity level of 180,000 direct labor-hours and to produce 120,000 units of product 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 i Actual variable manufacturing overhead cost incurred Actual fixed manufacturing overhead cost incurred 144,000 234,000 $ 561,600 $1,638,000 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 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. thead for the year by computing werhead rate and
Lane Company manufactures a single product that requires a great deal of hand labor. Overhead cost is applied on the basis of standard direct labor-hours. The budgeted variable manufacturing overhead is $4.00 per direct labor-hour and the budgeted fixed manufacturing overhead is $1,440,000 per year. The standard quantity of materials is 4 pounds per unit and the standard cost is $8.00 per pound. The standard direct labor-hours per unit is 1.5 hours and the standard labor rate is $13.00 per hour. The company planned to operate at a denominator activity level of 180,000 direct labor-hours and to produce 120,000 units of product 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 i Actual variable manufacturing overhead cost incurred Actual fixed manufacturing overhead cost incurred 144,000 234,000 $ 561,600 $1,638,000 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 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. thead for the year by computing werhead rate and
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
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Transcribed Image Text:Lane Company manufactures a single product that requires a great deal of hand labor. Overhead cost is applied on the basis of
standard direct labor-hours. The budgeted variable manufacturing overhead is $4.00 per direct labor-hour and the budgeted fixed
manufacturing overhead is $1,440,000 per year.
The standard quantity of materials is 4 pounds per unit and the standard cost is $8.00 per pound. The standard direct labor-hours per
unit is 1.5 hours and the standard labor rate is $13.00 per hour.
The company planned to operate at a denominator activity level of 180,000 direct labor-hours and to produce 120,000 units of product
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
144,000
234,000
$ 561,600
$1,638,000
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 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.
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