Lane Company manufactures a single product that requires a greatdeal of hand labor. Overhead cost is applied on the basis ofstandard direct labor-hours. The budgeted variable manufacturingoverhead is $3.40 per direct labor-hour and the budgeted fixedmanufacturing overhead is $999,000 per year.

The standard quantity of materials is 4 pounds per unit and thestandard cost is $6.50 per pound. The standard direct labor-hoursper unit is 1.5 hours and the standard labor rate is $12.70 perhour.

The company planned to operate at a denominator activity levelof 135,000 direct labor-hours and to produce 90,000 units ofproduct during the most recent year. Actual activity and costs forthe year were as follows:

Actual number of units produced		108,000
Actual direct labor-hours worked		175,500
Actual variable manufacturing overhead cost incurred	$	368,550
Actual fixed manufacturing overhead cost incurred	$	1,053,000

Required:

1. Compute the predetermined overhead rate for the year. Breakthe rate down into variable and fixed elements.

2. Prepare a standard cost card for the company’s product.

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

3b. Complete the following Manufacturing Overhead T-account forthe year.

4. Determine the reason for the underapplied or overappliedoverhead from (3) above by computing the variable overhead rate andefficiency variances and the fixed overhead budget and volumevariances.