The Claus Corporation makes and sells a single product and uses standard costing. During January, the company actually used 8,700 direct labor-hours (DLHs) and produced 3,000 units of product. The standard cost card for one unit of product includes the following: Variable factory overhead: 3.0 DLHs @ $4.00 per DLH.
Fixed factory overhead: 3.0 DLHs @ $3.50 per DLH.
For January, the company incurred $22,000 of actual fixed manufacturing overhead costs and recorded a $875 favorable volume variance.
The fixed manufacturing overhead cost used to compute the predetermined overhead rate was:
A)$31,500
B)$30,625
C)$32,375
D)$33,250

Question

Quizplus · Accepted Answer

First, we need to calculate the predetermined overhead rate (POHR) using the fixed and variable overhead costs.

Variable overhead rate = $4.00 per DLH 
Fixed overhead rate = $3.50 per DLH 
Total overhead rate = $7.50 per DLH

Next, we need to calculate the total overhead costs incurred:

Actual DLHs used = 8,700 
Total overhead costs = variable overhead costs + fixed overhead costs

Variable overhead costs = 3.0 DLHs per unit x $4.00 per DLH x 3,000 units = $36,000 
Fixed overhead costs = $22,000 - $875 favorable volume variance = $21,125

Total overhead costs = $36,000 + $21,125 = $57,125

Finally, we can calculate the fixed manufacturing overhead cost used in the POHR calculation:

Fixed manufacturing overhead cost = total overhead costs - (variable overhead rate x actual DLHs used)

Fixed manufacturing overhead cost = $57,125 - ($4.00 x 8,700) = $30,625

Therefore, the correct answer is B) $30,625.

The Claus Corporation Makes and Sells a Single Product and Uses