Lasser Company plans to produce 14,000 units next period at a denominator activity of 28,000 direct labor-hours. The direct labor wage rate is $12.00 per hour. The company's standards allow 2 yards of direct materials for each unit of product; the material costs $9.30 per yard.

Lasser Company plans to produce 14,000 units next period at a denominator activity of 28,000 direct labor-hours. The direct labor wage rate is $12.00 per hour. The company's standards allow 2 yards of direct materials for each unit of product; the material costs $9.30 per yard. The company's budget includes variable manufacturing overhead cost of $2.00 per direct labor-hour and fixed manufacturing overhead of $131,600 per period.

Required:

1. Using 28,000 direct labor-hours as the denominator activity, compute the predetermined overhead rate and break it down into variable and fixed elements.

2. Complete the standard cost card below for one unit of product.

Explanation

1.

Predetermined overhead rate	=	Total overhead at the denominator activity
		Denominator activity
	=	$2.00 per DLH × 28,000 DLHs + $131,600
		28,000 DLHs
	=	$187,600	= $6.70 per DLH
		28,000 DLHs

Fixed element: $131,600 ÷ 28,000 DLHs = $4.70 per DLH

2.

Direct labor hours: 28,000 DLHs ÷ 14,000 units = 2 DLHs per unit.

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