Question

I AM LOST THIS CHAPTER PLEASE HELP ASAP

Lane Company manufactures a single product and applies overhead cost to that product using standard direct labor-hours. The budgeted variable manufacturing overhead is $4.20 per direct labor-hour and the budgeted fixed manufacturing overhead is $1,599,000 per year. The standard quantity of materials is 4 pounds per unit and the standard cost is $8.50 per pound. The standard direct labor-hours per unit is 1.5 hours and the standard labor rate is $13.10 per hour. The company planned to operate at a denominator activity level of 195,000 direct labor-hours and to produce 130,000 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 156,000 253,500 $ 633,750 $1,774,500 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. Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Req ЗА Reg 3B Reg 4 Compute the predetermined overhead rate for the year. Break the rate down into variable and fixed elements. (Round your answers to 2 decimal places.) Predetermined overhead rate Variable rate Fixed rate per DLH per DLH per DLH Reg 2 >

Answer 1

Solution 1 and 2:

G Н 2 3 4 5 Solution 1: 6 Computation of Predetermined overhead rate - Lane Company 7 Particulars Amount Budgeted variable manufacturing overhead 8 |($4.20*195000) $819,000 Budgeted fixed manufacturing overhead $1,599,000 10 Total Manufacturing overhead /Budgeted direct labor hours $2,418,000 11 12 195000 234000 13 Predetermined overhead rate $12.40 14 Less: Variable overhead rate (Per direct labor hour) Fixed manufacturing overhead rate (per direct labor $4.20 15 16 $8.20 hour) 17 18 Solution 2: 19 Standard Cost Card Lane Company 20 4 Pounds at Direct Material $8.50 per pound $13.10 per DLH $34.00 21 Direct labor 1.5 DLHs at $19.65 22 Variable manufacturing overhead Fixed manufacturing overhead 1.5 DLHS at $4.20 per DLH $6.30 23 1.5 DLHS at $8.20 per DLH $12.30 24 25 Standard cost per unit $72.25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 161 (7) Sheet161 (8) Sheet832 Sheet834 Sheet836

Solution 3a:

Standard hours allowed = 156000*1.5 = 234,000 hours

Solution 3b:

R 4 5 6 7 solution 3b: Manufacturing Overhead 10 Particulars Debit Particulars Credit $2,901,600 Applied overhead(234000*$12.40) Actual costs incurred(633750+1774500) $2,408,250 11 12 To overhead variance (Overapplied 13 overhead) $493,350 14 $2,901,600 $2,901,600 Total Total 15 16 17 18 19 20 21 22 23 24 25 26 161 (7) Sheet26 (19) Sheet161 (8) Sheet743 (2) Sheet832 Sheet834 Sheet836 Sheet843 ПI

Solution 4:

Variable overhead actual rate = $633750/ 253500 = $2.50 per hour

Variable overhead rate variance = (SP - AP) *Actual Hours = ($4.20 - $2.50) * 253500 = $430,950 Favorable

Variable overhead Efficiency variance = (Standard hours - Actual Hours) *SP = (234000 - 253500)*$4.20 = $81,900 (Unfavorable)

Fixed overhead budget Variance = Budgeted Fixed Overhead - Actual Fixed overhead = $1599000 - $1774500 = $175,500 (unfavorable)

Fixed Overhead Volume Variance = ($8.20*234000) - $1599000 = $319,800 Favorable