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.
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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