A manufacturer of playground equipment uses a standard costing system in which standard machine-hours (MHs) is the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below: The following data pertain to operations for the most recent period: The fixed manufacturing overhead applied to products during the period is closest to:
A)$40,650
B)$42,981
C)$41,600
D)$46,070

Question

A manufacturer of playground equipment uses a standard costing system in which standard machine-hours (MHs) is the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below:  The following data pertain to operations for the most recent period:  The fixed manufacturing overhead applied to products during the period is closest to:
A)$40,650 
B)$42,981 
C)$41,600 
D)$46,070

Quizplus · Accepted Answer

The formula to calculate fixed manufacturing overhead applied to products is:

Fixed manufacturing overhead = Budgeted fixed overhead / Budgeted machine-hours * Actual machine-hours

Using the data given in the problem:

Budgeted fixed overhead = $417,000
Budgeted machine-hours = 45,000 MHs
Actual machine-hours = 50,000 MHs

Plugging in values:

Fixed manufacturing overhead = $417,000 / 45,000 MHs * 50,000 MHs

Fixed manufacturing overhead = $42,981.48

Therefore, the closest answer choice is B) $42,981.

A Manufacturer of Playground Equipment Uses a Standard Costing System