Culver, Inc.manufactures motors used in electric toothbrushes and other small appliances.Culver's fixed overhead rate is $7.60 and the company budgeted 165,000 direct labor hours for the year.During the year Culver produced 320,000 motors and used 164,000 direct labor hours.Culver's fixed overhead spending variance was $3,500 unfavorable for the year.What was Culver's actual fixed overhead for the year?

Question

Quizplus · Accepted Answer

We can use the formula:

Actual Fixed Overhead = Fixed Overhead Rate x Actual Direct Labor Hours

Actual Direct Labor Hours = 164,000

Fixed Overhead Rate = $7.60

Actual Fixed Overhead = $7.60 x 164,000 = $1,246,400

However, we are given that the fixed overhead spending variance was $3,500 unfavorable. This means that actual fixed overhead was higher than budgeted fixed overhead.

Budgeted Fixed Overhead = Fixed Overhead Rate x Budgeted Direct Labor Hours = $7.60 x 165,000 = $1,254,000

Actual Fixed Overhead = Budgeted Fixed Overhead + Fixed Overhead Spending Variance = $1,254,000 - $3,500 = $1,250,500

Therefore, the answer is choice B.