Question

Use the following information to answer Questions 9 through 13. Urbana Company calculates its predetermined manufacturing overhead rates using normal capacity, which is 288,000 units. The standard cost system allows 2 direct labor hours per unit produced. Manufacturing overhead is applied using direct labor hours. The total budgeted manufacturing overhead is $3,168,000, of which $864,000 is fixed manufacturing overhead. The actual results for the year are as follows.

Answer 1

Question - 9 .......... Select - (A) .... 1.50 per direct labor hour

Budgeted Fixed manufacturing overhead ................864000

Direct labor hours = 288,000 * 2 = 576000

Predetermined overhead rate = Budgeted fixed manufacturing overhead / Direct labor hours

= 864000 / 576000

= 1.50 per hour

Question - 10 .............Select - (D)

Fixed overhead spending variance = Budgeted fixed overhead - Actual fixed overhead

= 864000 - 872000

= 8000 Unfavorable

Question - 11 ............Select - (C)

Budget volume = 288000

Actual volume = 280,000

Hence decrease in volume = 288000 - 280000 = 8000 Units

Overhead recovery rate per Unit = 864000 / 288000 = 3 per unit

Hence .........Fixed overhead volume variance = SR * ( Budget volume - Actual volume )

= 3 * ( 288000 - 280000)

= 24000 Unfavorable

Question - 12 .................Select - ( B)

= Actual labor hours * ( Budget rate per hour - Actual rate per hour )

= 570,000 * ( 4 - 4.070175)

= 40000 Unfavorable