(Appendix 11A)The Murray Corporation uses a standard cost system in which it applies manufacturing overhead on the basis of standard direct labor-hours (DLHs).The company recorded the following activity and cost data for May: The fixed manufacturing overhead budget variance for May was:
A)$8, 000 F
B)$8, 000 U
C)$1, 600 F
D)$1, 600 U

Question

(Appendix 11A)The Murray Corporation uses a standard cost system in which it applies manufacturing overhead on the basis of standard direct labor-hours (DLHs).The company recorded the following activity and cost data for May:  The fixed manufacturing overhead budget variance for May was:
A)$8, 000 F 
B)$8, 000 U 
C)$1, 600 F 
D)$1, 600 U

Quizplus · Accepted Answer

Fixed component of the predetermined overhead rate = Budgeted fixed overhead ÷ Denominator level of activity
$0.90 per DLH = Budgeted fixed overhead cost ÷ 64, 000 DLHs
Budgeted fixed overhead cost = $0.90 per DLH × 64, 000 DLHs = $57, 600
Budget variance = Actual fixed overhead - Budgeted fixed overhead cost
= $56, 000 - $57, 600 = $1, 600 F

(Appendix 11A)The Murray Corporation Uses a Standard Cost System in Which