Zero Company's Standard Factory Overhead Rate Is $3

question 75

Multiple Choice

Zero Company's standard factory overhead rate is $3.75 per direct labor hour (DLH) , calculated at 90% capacity = 900 standard DLHs. In December, the company operated at 80% of capacity, or 800 standard DLHs. Budgeted factory overhead at 80% of capacity is $3,150, of which $1,350 is fixed overhead. For December, the actual factory overhead cost was $3,800 for 840 actual DLHs, of which $1,300 was for fixed factory overhead.

Under a three-way breakdown (decomposition) of the total overhead variance, what is the total factory overhead spending variance for Zero Company in December (to the nearest whole dollar) ?

• A) N/A—this variance doesn't exist under a three-way breakdown of the total overhead variance.
• B) $225 favorable.
• C) $425 unfavorable.
• D) $560 unfavorable.
• E) $600 unfavorable.

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Definitions:

Defective Bulbs

Refers to lightbulbs that fail to meet the quality standards or specifications and do not function as intended.

Binomial Random Variable

A type of random variable that follows the binomial distribution, representing the number of successes in a fixed number of independent trials, each with the same probability of success.

Discrete Random Variable

A variable that can take on a countable number of distinct values, often representing the outcomes of some random process.

Binomial Distribution

A probability distribution that summarizes the likelihood that a value will take one of two independent values under a given set of parameters or conditions.