Which of the following relationships is valid concerning fixed overhead budgeted at the beginning of the year?
A) BFOH = SFOR × AH
B) BFOH = SFOR × SH for actual production
C) BFOH = SFOR × SH for planned production
D) BFOH = SFOR / SH for actual production
E) None of these.

Question

Quizplus · Accepted Answer

BFOH (Budgeted Fixed Overhead) is equal to SFOR (Standard Fixed Overhead Rate) multiplied by SH (Standard Hours) for planned production. This is because BFOH is based on the estimated overhead costs for the year and the standard hours that are expected to be worked during that year. Planned production is used because it reflects the expected level of output for the year, which is what the overhead costs are based on. Option A is incorrect because AH (Actual Hours) are not used in the calculation of BFOH. Option B is incorrect because using actual production instead of planned production would not provide an accurate reflection of the expected overhead costs. Option D is incorrect because it uses a division formula rather than a multiplication formula. Option E is incorrect because there is a valid relationship between BFOH, SFOR, and SH for planned production.

Which of the Following Relationships Is Valid Concerning Fixed Overhead