Question

La-Z Co. applies overhead on the basis of direct labor hours. Selected data from La-Z’s second quarter budgets appear below:

Production Budget: 17,000 units to be produced
Direct Labor Budget – 1.5 labor hours to produce a single unit
Overhead Budget: $153,000 of fixed overhead cost

Actual data for the second quarter is as follows:
            Units produced: 20,000
            Labor hours worked: 30,500
            Actual Fixed Overhead cost: $148,000

a. The total estimated labor hours for the second quarter would be  hours.

b. The budgeted fixed overhead rate per direct labor hour is $ per direct labor hour.

c. The standard quantity of labor hours allowed for a single unit is  hours.

d. The fixed overhead spending variance is $

Answer 1

a)total estimated labor hours for the second quarter = Actual output *standard hours per unit

            = 20000*1.5

             = 30000 hours

b)budgeted fixed overhead rate per direct labor hour =Fixed overhead /estimated direct labor hours

= 153000/(17000*1.5)

= 153000 / 25500

= $ 6 per DLH

C)standard quantity of labor hours allowed for a single unit = 1.5 hours per unit

d)fixed overhead spending variance = Actual overhead -budgeted fixed overhead

              = 148000- 153000

             = - 5000F