1. Lee Manufacturing uses a standard cost system with overhead applied based on direct labor hours. The manufacturing budget for the production of 7,000 units for the month of June included 12,500 hours of direct labor at $17.00 per hour, or $212,500. During June, 6,400 units were produced, using 12,500 direct labor hours, incurring $52,000 of variable overhead, and showing a variable overhead efficiency variance of $4,200 unfavorable. What was the standard variable overhead rate per direct labor hour?
2. Manhattan Corporation has several divisions that operate as decentralized profit centers. At the present time, the Fabrication Division has excess capacity of 6,000 units with respect to the UT-371 circuit board, a popular item in many digital applications. Information about the circuit board is presented next.
Market price $50
Variable selling/distribution costs on external sales $ 7
Variable manufacturing cost $23
Fixed manufacturing cost $12
Manhattan's Electronic Assembly Division wants to purchase 5,500 circuit boards either internally or else use a similar board in the marketplace that sells for $47. The Electronic Assembly Division's management feels that if the first alternative is pursued, a price concession is justified, given that both divisions are part of the same firm. To optimize the overall goals of Manhattan, what is the minimum price to be charged for the board from the Fabrication Division to the Electronic Assembly Division?