Cannon Company's standard fixed overhead cost is $5 per direct labour hour on the basis of budgeted fixed costs of $500,000. The standard allows one direct labour hour per unit. During the current year, Cannon produced 110,000 units of product, incurred $550,000 of fixed overhead costs, and recorded 212,000 actual hours of direct labour.
-Refer to the Figure.What is the standard activity level on which Cannon based its fixed overhead rate?
A)50,000 direct labour hours
B)100,000 direct labour hours
C)105,000 direct labour hours
D)110,000 direct labour hours

Question

Quizplus · Accepted Answer

The budgeted fixed overhead costs of $500,000 divided by the standard fixed overhead rate of $5 per direct labour hour gives us the standard activity level of 100,000 direct labour hours.

Cannon Company's Standard Fixed Overhead Cost Is $5 Per Direct