Solution 1:
Predetermined overhead rate for the year = Budgeted overhead / Budgeted labor hours
= [(300000*$5.60) + $2,880,000) / 300000 = $15.20 per direct labor hour
Variable overhead rate per labor hour = $5.60
Fixed overhead rate per labor hour = $9.60
Solution 2:
Standard cost Card - Lane Company |
|||||
Particulars |
Qty |
Rate |
Per unit |
||
Direct material |
4 |
Pound at |
$12.00 |
Per Pound |
$48.00 |
Direct labor |
1.5 |
DLHs at |
$13.80 |
Per DLH |
$20.70 |
Variable overhead |
1.5 |
DLHs at |
$5.60 |
Per DLH |
$8.40 |
Fixed overhead |
1.5 |
DLHs at |
$9.60 |
Per DLH |
$14.40 |
Standard cost per unit |
$91.50 |
Solution 3a:
standard direct labor-hours allowed for the year’s production = 240000*1.50 = 360000 hours
Solution 3b:
Manufacturing overhead - Lane Company |
|||
Particulars |
Debit |
Particulars |
Credit |
Variable overhead incurred |
$1,248,000.00 |
Applied overhead (240000*1.5*$15.20) |
$5,472,000.00 |
Fixed overhead incurred |
$3,120,000.00 |
||
Overapplied overhead |
$1,104,000.00 |
||
Total |
$5,472,000.00 |
Total |
$5,472,000.00 |
Solution 4:
Actual rate of variable overhead = $1,248,000 / 390000 = $3.20 per labor hour
Variable overhead rate variance = (SR - AR) * AH = ($5.60 - $3.20) * 390000 = $936,000 F
Variable overhead efficiency variance = (SH - AH) *SR = (360000 - 390000) * $5.60 = $168,000 U
Fixed overhead budget variance = Budgeted fixed overhead - Actual fixed overhead = $2,880,000 - $3,120,000 = $240,000 U
Fixed overhead volume variance = Fixed overhead applied - Budgeted fixed overhead = (360000*$9.60) - $2,880,000
= $576,000 F
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