Question

Neptune Inc. uses a standard cost system and has the following information for the most recent...

Neptune Inc. uses a standard cost system and has the following information for the most recent month, April:

Actual direct labor hours (DLHs) worked 13,000
Standard DLHs allowed for good output produced this period 19,000
Actual total factory overhead costs incurred $ 38,000
Budgeted fixed factory overhead costs $ 10,600
Denominator activity level, in direct labor hours (DLHs) 15,000
Total factory overhead application rate per standard DLH $ 2.70

The total factory overhead flexible-budget variance in April for Neptune, Inc., to the nearest whole dollar, was: (Round your intermediate calculation to 2 decimal places.)

Multiple Choice

  • $11,350 favorable.
  • $10,410 favorable.
  • $10,310 unfavorable.
  • $11,530 favorable.

Homework Answers

Answer #1
Fixed factory overhead cost per DLH = 10600/15000 = $0.71
Variable factory overhead cost per DLH = 2.70-0.71 = $1.99
Total factory overhead in flexible-budget:
Fixed factory overhead costs 10600
Variable factory overhead costs 37810 =19000*1.99
Total factory overhead in flexible-budget 48410
Total factory overhead in flexible-budget 48410
Less: Actual total factory overhead costs incurred 38000
Total factory overhead flexible-budget variance 10410 Favorable
Option 2 $10,410 favorable is correct
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