Solution 1:
Predetermined overhead rate for the year = Budgeted overhead / Budgeted labor hours
= [(225000*$4.60) + $1,935,000) / 225000 = $13.20 per direct labor hour
Variable overhead rate per labor hour = $4.60
Fixed overhead rate per labor hour = $8.60
Solution 2:
Standard cost Card - Lane Company | |||||
Particulars | Qty | Rate | Per unit | ||
Direct material | 4 | Pound at | $9.50 | Per Pound | $38.00 |
Direct labor | 1.5 | DLHs at | $13.30 | Per DLH | $19.95 |
Variable overhead | 1.5 | DLHs at | $4.60 | Per DLH | $6.90 |
Fixed overhead | 1.5 | DLHs at | $8.60 | Per DLH | $12.90 |
Standard cost per unit | $77.75 |
Solution 3a:
Standard direct labor-hours allowed for the year’s production = 180000*1.50 = 270000 hours
Solution 3b:
Manufacturing overhead - Lane Company | |||
Particulars | Debit | Particulars | Credit |
Variable overhead incurred | $789,750.00 | Applied overhead (180000*1.5*$13.20) | $3,564,000.00 |
Fixed overhead incurred | $2,047,500.00 | ||
Overapplied overhead | $726,750.00 | ||
Total | $3,564,000.00 | Total | $3,564,000.00 |
Solution 4:
Actual rate of variable overhead = $789,750 / 292500 = $2.70 per labor hour
Variable overhead rate variance = (SR - AR) * AH = ($4.60 - $2.70) * 292500 = $555,750 F
Variable overhead efficiency variance = (SH - AH) *SR = (270000 - 292500) * $4.60 = $103,500 U
Fixed overhead budget variance = Budgeted fixed overhead - Actual fixed overhead = $1,935,000 - $2,047,500 = $112,500 U
Fixed overhead volume variance = Fixed overhead applied - Budgeted fixed overhead = (270000*$8.60) - $1,935,000
= $387,000 F
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