(Appendix 11A)The Murray Corporation makes and sells a single product.The company recorded the following activity and cost data for May: The fixed component of the predetermined overhead rate is $0.95 per direct labor-hour. The fixed manufacturing overhead budget variance for May was:
A)$2, 400 U
B)$2, 400 F
C)$6, 000 U
D)$6, 000 F

Question

(Appendix 11A)The Murray Corporation makes and sells a single product.The company recorded the following activity and cost data for May:  The fixed component of the predetermined overhead rate is $0.95 per direct labor-hour. The fixed manufacturing overhead budget variance for May was:
A)$2, 400 U 
B)$2, 400 F 
C)$6, 000 U 
D)$6, 000 F

Quizplus · Accepted Answer

$0.95 per DLH = Fixed manufacturing overhead ÷ 72, 000 DLHs
Fixed manufacturing overhead = $0.95 per DLH × 72, 000 DLHs
Fixed manufacturing overhead = $68, 400
Budget variance = Actual fixed overhead - Budgeted fixed overhead
= $66, 000 - $68, 400 = $2, 400 F

(Appendix 11A)The Murray Corporation Makes and Sells a Single Product