Colina Production Company Uses a Standard Costing System The Factory Overhead Rate Is Based on an Activity Level

question 76

Multiple Choice

Colina Production Company uses a standard costing system. The following information pertains to the current year. Direct labor hours is the driver used to assign overhead costs to products. $\begin{array}{ll}\text { Actual production } & 5,500 \text { units } \\\text { Actual factory overhead costs ( } \$ 16,500 \text { is fixed) } & \$ 40,125 \\\text { Actual direct labor costs }(11,250 \text { hours) } & \$ 131,625 \\\text { Standard direct labor for } 5,500 \text { units: } & \\\text { Standard hours allowed } & 11,000 \text { hours } \\\text { Labor rate } & \$ 12.00\end{array}$
The factory overhead rate is based on an activity level of 10,000 direct labor hours. Standard cost data for 5,000 units is as follows:
$\begin{array}{lr}\text { Variable factory overhead } & \$ 22,500 \\\text { Fixed factory overhead } & 13,500 \\\text { Total factory overhead } & \mathbf{\underline { 36 , 0 0 0 }}\end{array}$ What is the fixed overhead volume variance for Colina Production Company?

• A)$3,600 (F)
• B)$1,350 (F)
• C)$4,125 (U)
• D)$1,350 (U)

---

Definitions:

Cones

Specialized photoreceptor cells in the retina of the eye responsible for color vision and functioning best in relatively bright light.

Vision

The capability of the eyes and brain to interpret electromagnetic energy (light) into images, enabling sight.

Pitch

The perceived frequency of a sound, determining how high or low it seems.

Hertz

The unit of frequency in the International System of Units (SI), defined as one cycle per second.