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 varlable manufacturing overhead is $3.60 per direct labor-hour and the budgeted fixed manufacturing overhead is $1,140,00õ per year. The standard quantity of materials Is 4 pounds per unit and the standard cost is $7.00 per pound. The standard direct labor-hours per unit is 1.5 hours and the standard labor rate is $12.80 per hour. The company planned to operate at a denominator activity level of 150,000 dırect labor-hours and to produce 100,000 units of product during the most recent year. Actual activity and costs for the year were as follows: Actual number of units produced direct labor-hours worked Actual variable manufacturing overhead cost incurred Actual fixed manufacturing overhead cost incurred 120, eee 195, eee $ 429, e00 $1,170, eee Requlred: 1. Compute the predetermined overhead rate for the year. Break the rate down Into varlable 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 varlances and the fixed overhead budget and volume variances.
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 varlable manufacturing overhead is $3.60 per direct labor-hour and the budgeted fixed manufacturing overhead is $1,140,00õ per year. The standard quantity of materials Is 4 pounds per unit and the standard cost is $7.00 per pound. The standard direct labor-hours per unit is 1.5 hours and the standard labor rate is $12.80 per hour. The company planned to operate at a denominator activity level of 150,000 dırect labor-hours and to produce 100,000 units of product during the most recent year. Actual activity and costs for the year were as follows: Actual number of units produced direct labor-hours worked Actual variable manufacturing overhead cost incurred Actual fixed manufacturing overhead cost incurred 120, eee 195, eee $ 429, e00 $1,170, eee Requlred: 1. Compute the predetermined overhead rate for the year. Break the rate down Into varlable 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 varlances and the fixed overhead budget and volume variances.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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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 varlable manufacturing overhead Is $3.60 per direct labor-hour and the budgeted fixed
manufacturing overhead is $1,140,00õ per year.
The standard quantity of materlals is 4 pounds per unit and the standard cost is $7.00 per pound. The standard direct labor-hours per
unit is 1.5 hours and the standard labor rate is $12.80 per hour.
The company planned to operate at a denominator activity level of 150,000 direct labor-hours and to produce 100,000 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
120, eee
195,e00
$ 429, e00
$1,170,e00
Actual variable manufacturing overhead cost incurred
Actual fixed manufacturing overhead cost incurred
Requlred:
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 productilon.
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 varlable overhead rate and
efficlency varlances and the fixed overhead budget and volume varlances.
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