Skillful Ltd budgeted $900,000 for total overhead. The standard variable overhead rate was $1 per direct labour hour, or $3 per unit, based on an anticipated activity level of 300,000 direct labour hours. During the year 110,000 units were produced. Fixed overhead costs incurred were $90,000. The variable overhead budget variance was $5,500 unfavourable, and the actual variable overhead rate was $1.10 per direct labour hour. The standard direct labour hours allowed were:
A) 300,000
B) 600,000
C) 330,000
D) 36,667

Question

Quizplus · Accepted Answer

The standard direct labour hours allowed for the production of 110,000 units, given that the standard variable overhead rate is $3 per unit (which equates to 3 direct labour hours per unit based on the $1 per direct labour hour rate), would be 110,000 units * 3 hours/unit = 330,000 hours.

Skillful Ltd Budgeted $900,000 for Total Overhead