Question

Lane Company manufactures a single product and applies overhead cost to that product using standard direct labor-hours. The budgeted variable manufacturing overhead is $2.40 per direct labor-hour and the budgeted fixed manufacturing overhead is $384,000 per year.

The standard quantity of materials is 4 pounds per unit and the standard cost is $4.00 per pound. The standard direct labor-hours per unit is 1.5 hours and the standard labor rate is $12.20 per hour.

The company planned to operate at a denominator activity level of 60,000 direct labor-hours and to produce 40,000 units of product during the most recent year. Actual activity and costs for the year were as follows:

Actual number of units produced		48,000
Actual direct labor-hours worked		78,000
Actual variable manufacturing overhead cost incurred	$	124,800
Actual fixed manufacturing overhead cost incurred	$	429,000

Required:

1.Complete the following Manufacturing Overhead T-account for the year.

2.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.

Answer 1

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