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defon
3 years ago
10

Lane Company manufactures a single product that requires a great deal of hand labor. Overhead cost is applied on the basis of st

andard direct labor-hours. Variable manufacturing overhead should be $3.60 per standard direct labor-hour and fixed manufacturing overhead should be $1,140,000 per year.
The company’s product requires 4 pounds of material that has a standard cost of $7.00 per pound and 1.5 hours of direct labor time that has a standard rate of $12.80 per hour.
The company planned to operate at a denominator activity level of 150,000 direct labor-hours and to produce 100,000 units of product during the most recent year. Actual activity and costs for the year were as follows:

Number of units produced 120,000
Actual direct labor-hours worked 195,000
Actual variable manufacturing overhead cost incurred $429,000
Actual fixed manufacturing overhead cost incurred $1,170,000

Required:
a. Compute the predetermined overhead rate for the year. Break the rate down into variable and fixed elements. (Round your answers to 2 decimal places.)
b. Prepare a standard cost card for the company's product (Round your answers to 2 decimal places.)
c. Compute the standard direct labor-hours allowed for the year's production.
d. Determine the reason for the underapplied or overapplied overhead from above by computing the variable overhead rate and efficiency variances and the fixed overhead budget and volume variances. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)
Business
1 answer:
Musya8 [376]3 years ago
5 0

Answer and Explanation:

1. Predetermined overhead rate for the year = Budgeted overhead ÷ Budgeted labor hours

= (150,000 × $3.40) + $1,140,000) ÷ 150,000

= $11.20 per direct labor hour

Variable overhead rate per labor hour = $3.60

Fixed overhead rate per labor hour = $7.60

2.                       Standard cost Card - Lane Company

Particulars              Qty                   Rate                        Per unit

Direct material        4 Pound at     $7.00 Per Pound   $28.00

Direct labor             1.5 DLHs at     $12.80 Per DLH     $19.20

Variable overhead  1.5 DLHs at     $3.60 Per DLH      $5.40

Fixed overhead       1.5 DLHs at      $7.60 Per DLH     $11.40

Standard cost per unit                                                  $64.00

3. Standard direct labor-hours allowed for the year’s production = Number of units produced × Direct labor time

= 120,000 × 1.50

= 180,000 hours

4. Actual rate of variable overhead = $429,000 ÷ 195,000

= $2.20 per labor hour

Variable overhead rate variance = (SR - AR) × AH

= ($3.60 - $2.20) × 195,000

= $273,000 F

Variable overhead efficiency variance = (SH - AH) × SR

= (180,000 - 195,000) × $3.60

= $54,000 U

Fixed overhead budget variance = Budgeted fixed overhead - Actual fixed overhead

= $1,140,000 - $1,170,000

= $30,000 U

Fixed overhead volume variance = Fixed overhead applied - Budgeted fixed overhead

= (180,000 × $7.60) - $1,140,000

= $228,000 F

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The employee credit union at State University is planning the allocation of funds for the coming year. The credit union makes four types of loans to its members. In addition, the credit union invests in risk-free securities to stabilize income. The various revenue producing investments together with annual rates of return are as follows:

Type of Loan/Investment               Annual Rate of Return (%)

Automobile loans                                8

Furniture loans                                   10

Other secured loans                          11

Signature loans                                 12

Risk-free securities                            9

The credit union will have $1.6 million available for investment during the coming year. State laws and credit union policies impose the following restrictions on the composition of the loans and investments.

Risk-free securities may not exceed 30% of the total funds available for investment.

Signature loans may not exceed 10% of the funds invested in all loans (automobile, furniture, other secured, and signature loans).

Furniture loans plus other secured loans may not exceed the automobile loans.

Other secured loans plus signature loans may not exceed the funds invested in risk-free securities.

How should the $1.6 million be allocated to each of the loan/investment alternatives to maximize total annual return? Round your answers to the nearest dollar.

Automobile Loans $  

Furniture Loans $  

Other Secured Loans $  

Signature Loans $  

Risk Free Loans $  

What is the projected total annual return? Round your answer to the nearest dollar.

$  

Answer:

Explanation:

Let the amount invested in:

Automobile loans be Xa,

Furniture Loans be Xf,

Other Secured Loans be Xo,

Signature loans be Xs,    &;

Risk-free loans be Xr

In reference  on the Annual returns rate given;

Total annual returns = 8%×Xa + 10%×Xf + 11%×Xo + 12%×Xs + 9%×Xr

The various constraints given can be written as follows:

Xa + Xf + Xo + Xs + Xr = 1,600,000-----Constraint for amount available for investment

Xr = 30%*1,600,000 ----- Constraint for maximum risk free investment

Xs = 10%*(Xa + Xf + Xo + Xs) -----  Constraint for maximum amount in signature loans

Xf + Xo = Xa ------- Constraint for Furniture and other secured loans

Xo + Xs = Xr  ------ Constraint for other secured loans and signature loans

Using the Excel Formula for solving this;

we have the following result.

Automobile Loans                     $ 504,000

Furniture Loans                         $ 136,000

Other Secured Loans               $ 368,000

Signature Loans                        $ 112,000

Risk-Free Loans                        $ 480,000

The projected total annual return = $ 151,040

The computation of the excel formula on how we arrived at those valid figures above is shown in the attached files below.

Thanks!

5 0
3 years ago
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