Solution 1:
Computation of Predetermined overhead rate - Lane Company | |
Particulars | Amount |
Budgeted variable manufacturing overhead ($4.20*195000) | $819,000.00 |
Budgeted fixed manufacturing overhead | $1,599,000.00 |
Total Manufacturing overhead | $2,418,000.00 |
Budgeted direct labor hours | 195000 |
Predetermined overhead rate | $12.40 |
Variable overhead rate (Per direct labor hour) | $4.20 |
Fixed manufacturing overhead rate (per direct labor hour) | $8.20 |
Solution 2a:
Standard Cost Card - Lane Company | |
Particulars | Amount |
Direct Material (4*$8.50) | $34.00 |
Direct labor (1.5*$13.10) | $19.65 |
Variable manufacturing overhead (1.5*$4.20) | $6.30 |
Fixed manufacturing overhead (1.5*$8.20) | $12.30 |
Standard cost per unit | $72.25 |
Solution 3a:
Standard hours for actual production = 156000*1.50 = 234000 hours
Solution 3b:
Manufacturing Overhead | |||
Particulars | Debit | Particulars | Credit |
To Cash (Variable manufacturing overhead) | $633,750.00 | By WIP (Applied overhead) (156000*1.50*$12.40) | $2,901,600.00 |
To Cash (Fixed manufacturing overhead) | $1,774,500.00 | ||
To overhead variance (Overapplied overhead) | $493,350.00 | ||
Total | $2,901,600.00 | Total | $2,901,600.00 |
solution 4:
Variable overhead actual rate = $633750 / 253500 = $2.50 |
Variable overhead rate variance = (SP - AP) *Actual Hours = ($4.20 - $2.50) * 253500 = $430950 Favorable |
Variable overhead Efficiency variance = (Standard hours - Actual Hours) *SP = (156000*1.5 - 253500)*$4.20 = - $81,900 (Unfavorable) |
Fixed overhead budget Variance = Budgeted Fixed Overhead - Actual Fixed overhead = $1,599000 - $1,774,500 = -$175,500 (unfavorable) |
Fixed Overhead Volume Variance = ($8.20*156000*1.50) - $1,599,000 =$1,918,800 - 1,599,000 = $319,800 Favorable |
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