(Appendix 10A) Zotta Enterprises uses standard costing and applies manufacturing overhead cost to products on the basis of standard direct labor-hours (DLHs). Budgeted and actual data relating to manufacturing overhead for last year appear below:

-The fixed manufacturing overhead cost applied to products was:
A) $31,960
B) $37,250
C) $38,352
D) $39,846

Question

(Appendix 10A) Zotta Enterprises uses standard costing and applies manufacturing overhead cost to products on the basis of standard direct labor-hours (DLHs). Budgeted and actual data relating to manufacturing overhead for last year appear below:
 
-The fixed manufacturing overhead cost applied to products was:
A) $31,960 
B) $37,250 
C) $38,352 
D) $39,846

Quizplus · Accepted Answer

Budget variance = Actual fixed overhead - Budgeted fixed overhead
$1,300 U = $38,900 - Budgeted fixed overhead
$1,300 = $38,900 - Budgeted fixed overhead
Budgeted fixed overhead = $38,900 - $1,300
Budgeted fixed overhead = $37,600
Fixed component of the predetermined overhead rate = $37,600 ÷ 20,000 DLHs = $1.88 per DLH
Fixed manufacturing overhead cost applied = $1.88 per DLH × 1.2 DLHs per unit × 17,000 units = $38,352

(Appendix 10A) Zotta Enterprises Uses Standard Costing and Applies Manufacturing