Zero Company's Standard Factory Overhead Rate Is $3

question 98

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.

Assuming a four-variance breakdown (decomposition) of the total overhead variance, what is the fixed factory overhead efficiency variance (to the nearest whole dollar) for the period?

• A) N/A—this variance does not exist.
• B) $225 favorable.
• C) $425 unfavorable.
• D) $650 unfavorable.

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Definitions:

Feature Analysis

A process in cognitive psychology focusing on how the brain decomposes visual stimuli into individual features or components for recognition.

Bottom-Up

An approach to process information by starting with the specifics and then building up to a complete understanding.

Top-Down

An approach or process that is initiated from the higher levels of a hierarchy and carried through to the lower levels, often in decision-making or processing information.

Perceptual Set

A psychological framework that predisposes individuals to perceive information in a particular way based on their expectations, emotions, and experiences.