Solution 1:
Predetermined overhead rate for the year = Budgeted overhead / Budgeted labor hours
= [(120000*$3.20) + $864,000) / 120000 = $10.40 per direct labor hour
Variable overhead rate per labor hour = $3.20
Fixed overhead rate per labor hour = $7.20
Solution 2:
Standard cost Card - Lane Company | |||||
Particulars | Qty | Rate | Per unit | ||
Direct material | 4 | Pound at | $6.00 | Per Pound | $24.00 |
Direct labor | 1.5 | DLHs at | $12.60 | Per DLH | $18.90 |
Variable overhead | 1.5 | DLHs at | $3.20 | Per DLH | $4.80 |
Fixed overhead | 1.5 | DLHs at | $7.20 | Per DLH | $10.80 |
Standard cost per unit | $58.50 |
solution 3a:
Standard direct labor-hours allowed for the year’s production = 96000*1.50 = 144000 hours
Solution 3b:
Manufacturing overhead - Lane Company | |||
Particulars | Debit | Particulars | Credit |
Variable overhead incurred | $312,000.00 | Applied overhead (96000*1.5*$10.40) | $1,497,600.00 |
Fixed overhead incurred | $936,000.00 | ||
Overapplied overhead | $249,600.00 | ||
Total | $1,497,600.00 | Total | $1,497,600.00 |
Solution 4:
Actual rate of variable overhead = $312,000 / 156000 = $2 per labor hour
Variable overhead rate variance = (SR - AR) * AH = ($3.20 - $2) * 156000 = $187,200 F
Variable overhead efficiency variance = (SH - AH) *SR = (144000 - 156000) * $3.20 = $38,400 U
Fixed overhead budget variance = Budgeted fixed overhead - Actual fixed overhead = $864,000 - $936,000 = $72,000 U
Fixed overhead volume variance = Fixed overhead applied - Budgeted fixed overhead = (144000*$7.20) - $864,000
= $172,800 F
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