Question

Bluecap Co. uses a standard cost system and flexible budgets for control purposes. The following budgeted...

Bluecap Co. uses a standard cost system and flexible budgets for control purposes. The following budgeted information pertains to 2019:

Denominator volume—number of units 8,000
Denominator volume—percent of capacity 80 %
Denominator volume—standard direct labor hours (DLHs) 24,000
Budgeted variable factory overhead cost at denominator volume $ 103,200
Total standard factory overhead rate per DLH $ 15.10

During 2019, Bluecap worked 28,000 DLHs and manufactured 9,600 units. The actual factory overhead cost for the year was $14,000 greater than the flexible budget amount for the units produced, of which $6,000 was due to fixed factory overhead. In preparing a budget for 2020 Bluecap decided to raise the level of operation to 90% of capacity (a level it considers to be "practical capacity"), to manufacture 9,000 units at a budgeted total of 27,000 DLHs.

The total overhead variance in 2019 for Bluecap Co., to the nearest whole dollar, was:

Multiple Choice

$14,000 unfavorable.

$15,040 favorable.

$17,280 favorable.

$37,840 favorable.

$37,840 unfavorable.

Homework Answers

Answer #1
Number of units 9600
DLH per unit 3
Budgeted direct labor hours 28800 (9600*3)
Factory overhead rate per hour 15.1
Total factory overheads budgeted 434880
Fcatory overheads as per 8000 hours 362400 (8000*15.10)
Variable factory overheads 103200
Fixed factory overheads 259200
Variable factory overheads per hour 4.3 (103200/24000)
Variable overheads for 28800 hours 123840 (28800*4.3)
Fixed overheads 259200
Total overheads 383040
Add Variance 14000
Actual factory overheads 397040
Total factory overheads budgeted 434880
Total overheads variance 37840 Favorable
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