The Chuba Corporation uses a standard cost system in which manufacturing overhead is applied on the basis of standard direct labor-hours (DLHs). During December, the company actually used 7,200 direct labor-hours and made 1,900 units of finished product. The standard cost card for one unit of product includes the following data concerning manufacturing overhead: Variable overhead: 4 DLHs @ $5.25 per DLH
Fixed overhead: 4 DLHs @ $2.00 per DLH
For December, the company incurred $16,550 in fixed manufacturing overhead costs and recorded an $800 unfavorable volume variance.
The budgeted fixed manufacturing overhead cost was:
A) $15,200
B) $16,000
C) $16,550
D) $13,700
E) $14,400

Question

Quizplus · Accepted Answer

Fixed overhead applied to work in process = $2.00 per DLH × 4.0 DLHs per unit × 1,900 units = $15,200
Volume variance = Budgeted fixed overhead − Fixed overhead applied to work in process
$800 U = Budgeted fixed overhead − $15,200
$800 = Budgeted fixed overhead − $15,200
Budgeted fixed overhead = $15,200 + $800 = $16,000

The Chuba Corporation Uses a Standard Cost System in Which