Reference no: EM132778004

Question - Morton Company's budgeted variable manufacturing overhead is $4.50 per direct labor-hour and its budgeted fixed manufacturing overhead is $270,000 per year.

The company manufactures a single product whose standard direct labor-hours per unit is 2 hours. The standard direct labor wage rate is $15 per hour. The standards also allow 4 feet of raw material per unit at a standard cost of $8.75 per foot.

Although normal activity is 30,000 direct labor-hours each year, the company expects to operate at a 40,000-hour level of activity this year.

Required -

1. Assume that the company chooses 30,000 direct labor-hours as the denominator level of activity. Compute the predetermined overhead rate, breaking it down into variable and fixed cost elements.

2. Assume that the company chooses 40,000 direct labor-hours as the denominator level of activity. Compute the predetermined overhead rate, breaking it down into variable and fixed cost elements.

3. Complete two standard cost cards for 30,000 & 40,000 DLHs.

4. Assume that the company actually produces 18,000 units and works 38,000 direct labor-hours during the year. Actual manufacturing overhead costs for the year are:

Variable manufacturing overhead cost $174,800

Fixed manufacturing overhead cost 271,600

Total manufacturing overhead cost $446,400

a. Compute the standard direct labor-hours allowed for this year's production.

b. Complete the Manufacturing Overhead T-account below. Assume that the company uses 30,000 direct labor-hours (normal activity) as the denominator activity figure in computing predetermined overhead rates, as you have done in (1) above.

c. Assume that the company uses 30,000 direct labor-hours (normal activity) as the denominator activity figure in computing predetermined overhead rates, as you have done in requirement (1).