Croissant Company's standard fixed overhead cost is $6 per direct labor hour based on budgeted fixed costs of $600,000. The standard allows 1 direct labor hour per unit. During 2016, Croissant produced 110,000 units of product, incurred $630,000 of fixed overhead costs, and recorded 212,000 actual hours of direct labor.
What is the standard activity level on which Croissant based its fixed overhead rate?
A) 100,000 direct labor hours
B) 105,000 direct labor hours
C) 110,000 direct labor hours
D) 50,000 direct labor hours

Question

Quizplus · Accepted Answer

The standard fixed overhead rate is calculated as budgeted fixed costs divided by the standard activity level. Given the fixed overhead rate of $6 per direct labor hour and budgeted fixed costs of $600,000, the standard activity level is $600,000 / $6 = 100,000 direct labor hours.

Croissant Company's Standard Fixed Overhead Cost Is $6 Per Direct