Jewel Company calculates its predetermined rates using practical volume, which is 300,000 units. The standard cost system allows two direct labour hours per unit produced. Overhead is applied using direct labour hours. The total budgeted overhead is $3,200,000 of which $900,000 is fixed overhead. The actual results for the year are as follows:
$\begin{array}{ll}
\text { Units produced: } & 280,000 \
\text { Direct labour: } & 570,000 \text { hours }@\$ 9 \text { per hour } \
\text { Variable overhead: } & \$ 2,320,000 \
\text { Fixed overhead: } & \$ 872,000
\end{array}$
-Refer to the Figure.What is the applied fixed overhead?
A)$840,000
B)$855,000
C)$864,000
D)$910,000

Question

Jewel Company calculates its predetermined rates using practical volume, which is 300,000 units. The standard cost system allows two direct labour hours per unit produced. Overhead is applied using direct labour hours. The total budgeted overhead is $3,200,000 of which $900,000 is fixed overhead. The actual results for the year are as follows:
 $\begin{array}{ll}
\text { Units produced: } & 280,000 \
\text { Direct labour: } & 570,000 \text { hours }@\$ 9 \text { per hour } \
\text { Variable overhead: } & \$ 2,320,000 \
\text { Fixed overhead: } & \$ 872,000
\end{array}$
-Refer to the Figure.What is the applied fixed overhead?
A)$840,000
B)$855,000
C)$864,000
D)$910,000

Quizplus · Accepted Answer

The applied fixed overhead is calculated as follows:Predetermined overhead rate = Total budgeted overhead / Practical volume= $3,200,000 / 300,000 units= $10.67 per unitApplied fixed overhead = Predetermined overhead rate x Actual units produced= $10.67 per unit x 280,000 units= $840,000

Jewel Company Calculates Its Predetermined Rates Using Practical Volume, Which