Ronda Manufacturing Corporation uses a standard cost system with machine-hours as the activity base for overhead. Last year, Ronda incurred $840,000 of fixed manufacturing overhead and generated a $42,000 favorable fixed manufacturing overhead budget variance. The following data relate to last year's operations: What amount of total fixed manufacturing overhead cost did Ronda apply to production last year?
A) $837,900
B) $840,000
C) $926,100
D) $972,405

Question

Ronda Manufacturing Corporation uses a standard cost system with machine-hours as the activity base for overhead. Last year, Ronda incurred $840,000 of fixed manufacturing overhead and generated a $42,000 favorable fixed manufacturing overhead budget variance. The following data relate to last year's operations:  What amount of total fixed manufacturing overhead cost did Ronda apply to production last year?
A) $837,900 
B) $840,000 
C) $926,100 
D) $972,405

Quizplus · Accepted Answer

Budget variance = Actual fixed overhead − Budgeted fixed overhead
$42,000 F = $840,000 − Budgeted fixed overhead
−$42,000 = $840,000 − Budgeted fixed overhead
Budgeted fixed overhead = $840,000 + $42,000
Budgeted fixed overhead = $882,000
Fixed component of the predetermined overhead rate = $882,000 ÷ 21,000 MHs = $42 per MH
Fixed manufacturing overhead cost applied to production = 20,000 MHs × $42 per MH = $840,000

Ronda Manufacturing Corporation Uses a Standard Cost System with Machine-Hours