The Hawkins Company uses a standard costing system in which manufacturing overhead is applied on the basis of standard direct labor-hours (DLHs). During February, the company actually used 9,200 direct labor-hours and made 2,900 units of finished product. The standard cost card for one unit of product includes the following:

Variable factory overhead: 3 DLHs $4.75 per DLH
Fixed factory overhead: 3 DLHs $3.00 per DLH

For February, the company incurred $28,450 in fixed manufacturing overhead costs and recorded a $900 favorable volume variance.

-The denominator activity level in direct labor-hours used by Hawkins in setting the predetermined overhead rate for February is:
A)9,300 hours
B)8,400 hours
C)9,000 hours
D)8,700 hours

Question

The Hawkins Company uses a standard costing system in which manufacturing overhead is applied on the basis of standard direct labor-hours (DLHs). During February, the company actually used 9,200 direct labor-hours and made 2,900 units of finished product. The standard cost card for one unit of product includes the following:

Variable factory overhead: 3 DLHs   $4.75 per DLH
Fixed factory overhead: 3 DLHs   $3.00 per DLH

For February, the company incurred $28,450 in fixed manufacturing overhead costs and recorded a $900 favorable volume variance.

-The denominator activity level in direct labor-hours used by Hawkins in setting the predetermined overhead rate for February is:
A)9,300 hours
B)8,400 hours
C)9,000 hours
D)8,700 hours

Quizplus · Accepted Answer

Fixed component of predetermined overhead rate = Estimated total fixed manufacturing overhead cost F1F1F1S1F1F1F10 Denominator level of activity
$3 per hour = $25,200 F1F1F1S1F1F1F10 Denominator level of activity
Denominator level of activity = $25,200 F1F1F1S1F1F1F10 $3 per hour = 8,400 hours

The Hawkins Company Uses a Standard Costing System in Which