Diehl Corporation uses a standard cost system in which it applies manufacturing overhead to units of product on the basis of standard direct labor-hours.The company's total applied factory overhead was $315,000 last year when the company used 32,000 direct labor-hours as the denominator activity.If the variable factory overhead rate was $8 per direct labor-hour, and if 30,000 standard direct labor-hours were allowed for the output of the year, then the total budgeted fixed factory overhead for the year must have been:
A)$60,000
B)$80,000
C)$90,000
D)$100,000

Question

Quizplus · Accepted Answer

Overhead applied = Predetermined overhead rate × Standard hours allowed for the actual output
$315,000 = Predetermined overhead rate × 30,000 direct labor-hours
Predetermined overhead rate = $315,000 ÷ 30,000 direct labor-hours = $10.50 per direct labor-hour
Fixed component of the predetermined overhead rate = $10.50 per direct labor-hour - $8.00 per direct labor-hour = $2.50 per direct labor-hour
$2.50 per direct labor-hour = Total budgeted fixed factory overhead ÷ 32,000 direct labor-hours
Total budgeted fixed factory overhead = $2.50 per direct labor-hour × 32,000 direct labor-hours = $80,000

Diehl Corporation Uses a Standard Cost System in Which It