Operating at a normal level of 30,000 direct labor-hours, Lasser Company produces 10,000 units of product each period. The direct labor wage rate is $12 per hour. Two and one-half yards of direct materials gointo each unit of product; the material costs $8.60 per yard. Variable manufacturing overhead should be$1.90 per standard direct labor-hour. Fixed manufacturing overhead should be $168,000 per period.Required:1. Using 30,000 direct labor-hours as the denominator activity, compute the predetermined overhead rateand break it down into variable and fixed elements.2. Complete the standard cost card below for one unit of product:Direct materials, 2.5 yards at $8.60 per yard ......................... $21.50Direct labor, ? ........................................................................ ?Variable manufacturing overhead, ? ...................................... ?Fixed manufacturing overhead, ? .......................................... ?Total standard cost per unit ................................................... $ ?
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.
Operating at a normal level of 30,000 direct labor-hours, Lasser Company produces 10,000 units of product each period. The direct labor wage rate is $12 per hour. Two and one-half yards of direct materials go
into each unit of product; the material costs $8.60 per yard. Variable manufacturing
$1.90 per standard direct labor-hour. Fixed manufacturing overhead should be $168,000 per period.
Required:
1. Using 30,000 direct labor-hours as the denominator activity, compute the predetermined overhead rate
and break it down into variable and fixed elements.
2. Complete the
Direct materials, 2.5 yards at $8.60 per yard ......................... $21.50
Direct labor, ? ........................................................................ ?
Variable manufacturing overhead, ? ...................................... ?
Fixed manufacturing overhead, ? .......................................... ?
Total standard cost per unit ................................................... $ ?
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