- If The Denominator Activity Level Exceeds The Standard Hours Allowed For The Output The Volume Variance Will Be Favoura 1 (6.47 KiB) Viewed 17 times
Reed Company applies manufacturing overhead costs to products on the basis of direct labour-hours. The standard cost card shows that 6 direct labour-hours are required per unit of product. For August, the company budgeted to work 180,000 direct labour-hours and to incur the following total manufacturing overhead costs: Total variable overhead costs $198,000 $237,600 Total fixed overhead costs During August, the company completed 28,000 units of product, worked 172,000 direct labour-hours, and incurred the following total manufacturing overhead costs: Total variable overhead costs Total fixed overhead costs $197,800 $230, 600 The denominator activity in the predetermined overhead rate is 180,000 direct labour-hours. (Note that this is the same data that was provided for the previous question.) The fixed overhead budget variance for August is: Multiple Choice $7,000 F $7,000 U $6,400 F $6,400 U