Gerhan Company's Flexible Budget for the Units Manufactured in May

question 152

Multiple Choice

Gerhan Company's flexible budget for the units manufactured in May shows $15,640 of total factory overhead; this output level represents 70% of available capacity. During May, the company applied overhead to production at the rate of $3.00 per direct labor hour (DLH) , based on a denominator volume level of 6,120 DLHs, which represents 90% of available capacity. The company used 5,000 DLHs and incurred $16,500 of total factory overhead cost during May, including $6,800 for fixed factory overhead.
What is the variable factory overhead spending variance (to the nearest whole dollar) in May, assuming Gerhan uses a four-variance breakdown (decomposition) of the total overhead variance?

• A) $180 unfavorable.
• B) $300 favorable.
• C) $380 unfavorable.
• D) $480 unfavorable.
• E) N/A—this variance is not defined under the four-way breakdown of the total OVH variance.

---

Definitions:

Acceptance

The act of agreeing to receive something offered or the acknowledgment of a new contractual proposal.

Predominant-Purpose Test

A legal test used to determine the primary objective or nature of a contract when it serves multiple purposes, impacting enforcement and interpretation.

Service-Warranty Test

An assessment used to determine whether a warranty offers a promise to repair or replace a product, or a promise of a specific level of performance.

UCC

The extensive array of commercial transaction laws in the United States is known as the Uniform Commercial Code.