Bluecap Co During 2019, Bluecap Worked 28,000 DLHs and Manufactured 9,600 Units

question 95

Multiple Choice

Bluecap Co. uses a standard cost system and flexible budgets for control purposes. The following budgeted information pertains to 2019: $\begin{array}{lrr}\text { Denominator volume-number of units }&8,000\\\text { Denominator volume-percent of capacity }&80\%\\\text { Denominator volume-standard direct labor hours (DLHs) } & 24,000 \\\text { Budgeted variable factory overhead cost at denominator volume } & \$103,200 \\\text { Total standard factory overhead rate per DLH } &\$ 15.10\end{array}$ During 2019, Bluecap worked 28,000 DLHs and manufactured 9,600 units. The actual factory overhead cost for the year was $14,000 greater than the flexible budget amount for the units produced, of which $6,000 was due to fixed factory overhead. In preparing a budget for 2020 Bluecap decided to raise the level of operation to 90% of capacity (a level it considers to be "practical capacity") , to manufacture 9,000 units at a budgeted total of 27,000 DLHs.
Under the assumption that the total budgeted fixed overhead for 2020 is the same as it was for 2019, what is the standard fixed overhead application rate per DLH (to two (2) decimal places) for Bluecap Co. for 2020?

• A) $4.30.
• B) $4.50.
• C) $6.90.
• D) $9.30.
• E) $9.60.

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Definitions:

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