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Home / Questions / PROBLEM 10A 11 Applying Overhead; Overhead Variances LO3 LO4 Wymont Company produces a sin...

PROBLEM 10A 11 Applying Overhead; Overhead Variances LO3 LO4 Wymont Company produces a single product that requires a large amount of labor time Overhead cost is applied on the basis of

PROBLEM 10A–11 Applying Overhead; Overhead Variances [LO3, LO4]

Wymont Company produces a single product that requires a large amount of labor time. Over- head cost is applied on the basis of standard direct labor-hours. Variable manufacturing over- head should be $2.00 per standard direct labor-hour and fixed manufacturing overhead should be

$180,000 per year.

The company’s product requires 4 feet of direct material that has a standard cost of $3.00 per foot. The product requires 1.5 hours of direct labor time. The standard labor rate is $12.00 per hour. During the year, the company had planned to operate at a denominator activity level of 30,000 direct labor-hours and to produce 20,000 units of product. Actual activity and costs for the year

were as follows:

 

Number of units produced . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

22,000

Actual direct labor-hours worked . . . . . . . . . . . . . . . . . . . . . . . .

35,000

Actual variable manufacturing overhead cost incurred . . . . . . .

$63,000

Actual fixed manufacturing overhead cost incurred . . . . . . . . . .

$181,000

 

 

 

Required:

1.       Compute the predetermined overhead rate for the year. Break the rate down into variable and fixed components.

2.       Prepare a standard cost card for the company’s product; show the details for all manufacturing costs on your standard cost card.

3.       a.     Compute the standard direct labor-hours allowed for the year’s production.

b.    Complete the following Manufacturing Overhead T-account for the year:

 

Manufacturing Overhead

 

 

4.       Determine the reason for the underapplied or overapplied overhead from (3) above by com- puting the variable overhead rate and efficiency variances and the fixed overhead budget and volume variances.

5.       Suppose the company had chosen 36,000 direct labor-hours as the denominator activity rather than 30,000 hours. State which, if any, of the variances computed in (4) above would have changed, and explain how the variance(s) would have changed. No computations are necessary.

Jun 28 2020 View more View Less

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