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
