Dori Castings is a job order shop that uses a standard cost system to account for its production costs. Manufacturing overhead costs are applied to production on the basis of direct labour hours.
-What amount of fixed overhead would Dori apply to finished production?
A) The actual direct labour hours multiplied by the standard fixed overhead rate per direct labour hour.
B) The standard hours allowed for the actual units of finished output multiplied by the standard fixed overhead rate per direct labour hour.
C) The standard units of output for the actual direct labour hours worked multiplied by the standard fixed overhead rate per unit of output.
D) The actual fixed overhead cost per direct labour hour multiplied by the standard hours allowed.

Question

Quizplus · Accepted Answer

Dori Castings uses a standard cost system, which means that they apply manufacturing overhead costs to production on the basis of direct labour hours. The amount of fixed overhead that Dori would apply to finished production would be the standard hours allowed for the actual units of finished output multiplied by the standard fixed overhead rate per direct labour hour. This is because the standard hours allowed represent the expected amount of time it should take to produce one unit, and multiplying this by the standard fixed overhead rate per direct labour hour gives us the total amount of fixed overhead that should be applied to that unit.

Dori Castings Is a Job Order Shop That Uses a Standard