Crawford Company's standard fixed overhead cost is $6 per direct labor hour based on budgeted fixed costs of $600,000.The standard allows 1 direct labor hour per unit.During 2006, Crawford produced 110,000 units of product, incurred $630,000 of fixed overhead costs, and recorded 212,000 actual hours of direct labor.
- What is the standard activity level on which Crawford based its fixed overhead rate?
A) 110,000 direct labor hours
B) 105,000 direct labor hours
C) 100,000 direct labor hours
D) 50,000 direct labor hours

Question

Quizplus · Accepted Answer

The standard fixed overhead rate is calculated by dividing budgeted fixed costs by the standard activity level. Therefore, the standard activity level can be calculated by dividing the budgeted fixed costs by the standard fixed overhead rate:
$600,000 ÷ $6 per direct labor hour = 100,000 direct labor hours
So the standard activity level on which Crawford based its fixed overhead rate is 100,000 direct labor hours, and the closest option to this is choice C. Therefore, the answer is C.

Crawford Company's Standard Fixed Overhead Cost Is $6 Per Direct