Wymont Company produces a single product that requires a large amount of labor time. Overhead cost is

Question:

Wymont Company produces a single product that requires a large amount of labor time. Overhead cost is applied on the basis of standard direct labor-hours. The company's condensed flexible budget for manufacturing overhead is given below:

The company's product requires 4 feet of direct material that has a standard cost of $3 per foot. The product requires 1.5 hours of direct labor time. The standard labor rate is $12 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:

4. Determine the reason for the underapplied or overapplied overhead from (3) above by computing the variable overhead spending 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 arenecessary.