Dori Castings is a job order shop that uses a standard cost system.Manufacturing overhead costs are applied on the basis of standard direct labor-hours. The amount of fixed manufacturing overhead that Dori would apply to finished production would be:
A) the actual direct labor-hours times the standard fixed manufacturing overhead rate per direct labor-hour.
B) the standard hours allowed for the actual units of finished output times the standard fixed manufacturing overhead rate per direct labor-hour.
C) the standard units of output for the actual direct labor-hours worked times the standard fixed manufacturing overhead rate per unit of output.
D) the actual fixed manufacturing overhead cost per direct labor-hour times the standard hours allowed.

Question

Quizplus · Accepted Answer

Fixed manufacturing overhead is applied based on the standard direct labor-hours. Therefore, the amount of fixed manufacturing overhead applied to finished production should be calculated using the standard hours allowed for the actual units of output, multiplied by the standard fixed manufacturing overhead rate per direct labor-hour. Choice A is incorrect because it uses actual direct labor-hours, which is not relevant for applying standard costs. Choice C is incorrect because it uses standard units of output, which is not relevant for applying fixed manufacturing overhead. Choice D is incorrect because it uses actual fixed manufacturing overhead cost per direct labor-hour, which is not relevant for applying standard costs.

Dori Castings Is a Job Order Shop That Uses a Standard