Lane Company manufactures a single product that requires a great deal of hand labor. Overhead cost isapplied on the basis of standard direct labor-hours. Variable manufacturing overhead should be $2 perstandard direct labor-hour and fixed manufacturing overhead should be $480,000 per year.The company’s product requires 3 pounds of material that has a standard cost of $7 per pound and1.5 hours of direct labor time that has a standard rate of $12 per hour.The company planned to operate at a denominator activity level of 60,000 direct labor-hours and toproduce 40,000 units of product during the most recent year. Actual activity and costs for the year wereas follows:Number of units produced ........................................................... 42,000Actual direct labor-hours worked ................................................ 65,000Actual variable manufacturing overhead cost incurred ................ $123,500Actual fixed manufacturing overhead cost incurred ..................... $483,000Required:1. Compute the predetermined overhead rate for the year. Break the rate down into variable and fixedelements.2. Prepare a standard cost card for the company’s product; show the details for all manufacturing costson your standard cost card.3. Do the following:a. Compute the standard direct labor-hours allowed for the year’s production.b. Complete the following Manufacturing Overhead T-account for the year:Manufacturing Overhead? ?? ?4. Determine the reason for any underapplied or overapplied overhead for the year by computingthe variable overhead rate and efficiency variances and the fixed overhead budget and volumevariances.5. Suppose the company had chosen 65,000 direct labor-hours as the denominator activity rather than60,000 hours. State which, if any, of the variances computed in (4) above would have changed, andexplain how the variance(s) would have changed. No computations are necessary.
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.
Lane Company manufactures a single product that requires a great deal of hand labor.
applied on the basis of standard direct labor-hours. Variable manufacturing overhead should be $2 per
standard direct labor-hour and fixed manufacturing overhead should be $480,000 per year.
The company’s product requires 3 pounds of material that has a
1.5 hours of direct labor time that has a standard rate of $12 per hour.
The company planned to operate at a denominator activity level of 60,000 direct labor-hours and to
produce 40,000 units of product during the most recent year. Actual activity and costs for the year were
as follows:
Number of units produced ........................................................... 42,000
Actual direct labor-hours worked ................................................ 65,000
Actual variable
Actual fixed manufacturing overhead cost incurred ..................... $483,000
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; show the details for all manufacturing costs
on your standard cost card.
3. Do the following:
a. Compute the standard direct labor-hours allowed for the year’s production.
b. Complete the following Manufacturing Overhead T-account for the year:
Manufacturing Overhead
? ?
? ?
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.
5. Suppose the company had chosen 65,000 direct labor-hours as the denominator activity rather than
60,000 hours. State which, if any, of the variances computed in (4) above would have changed, and
explain how the variance(s) would have changed. No computations are necessary.
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 6 images
