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Problem 11-16 (continued)
3. The computations to follow will require the standard quantities allowed
for the actual output for direct labor in each department.
Standard Hours Allowed
Sintering:
Production of Alpha8 (0.20 hours per unit × 1,500 units) ..
300 hours
Production of Zeta9 (0.35 hours per unit × 2,000 units) ....
700 hours
Total ..............................................................................
1,000 hours
Finishing:
Production of Alpha8 (0.80 hours per unit × 1,500 units) ..
1,200 hours
Production of Zeta9 (0.90 hours per unit × 2,000 units) ....
1,800 hours
Total ..............................................................................
3,000 hours
Direct Labor Variances—Sintering:
Labor efficiency variance = SR (AH – SH)
= $20.00 per hour (1,200 hours – 1,000 hours)
= $4,000 U
Labor rate variance = AH (AR – SR)
= 1,200 hours ($22.50 per hour* – $20.00 per hour)
= $3,000 U
*$27,000 ÷ 1,200 hours = $22.50 per hour
Direct Labor Variances—Finishing:
Labor efficiency variance = SR (AH – SH)
= $19.00 per hour (2,850 hours – 3,000 hours)
= $2,850 F
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Solutions Manual, Chapter 11 555
Exercise 11A-1 (15 minutes)
1. The total overhead cost at the denominator level of activity must be
determined before the predetermined overhead rate can be computed.
Total fixed overhead cost per year .................................
$600,000
Total variable overhead cost
($3.50 per DLH × 80,000 DLHs) ..................................
280,000
Total overhead cost at the denominator level of activity ..
$880,000
Overhead at the denominator level of activity
Predetermined=
overhead rate Denominator level of activity
$880,000
= =$11.00 per DLH
80,000 DLHs
2.
Standard direct labor-hours allowed for
the actual output (a) ...........................
82,000
DLHs
Predetermined overhead rate (b) ...........
$11.00
per DLH
Overhead applied (a) × (b) ....................
$902,000
