Zero Company's Standard Factory Overhead Application Rate Is $3

question 144

Multiple Choice

Zero Company's standard factory overhead application 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 incurred was $3,800 for 840 actual DLHs, of which $1,300 was for fixed factory overhead.

If Zero Company uses a two-way breakdown (decomposition) of the total overhead variance, what is the total factory overhead flexible-budget variance for December (to the nearest whole dollar) ?

• A) N/A—this variance doesn't exist under a two-way breakdown of the total overhead variance.
• B) $225 favorable.
• C) $425 unfavorable.
• D) $650 unfavorable.
• E) $690 unfavorable.

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Definitions:

Future Generations

Refers to the people who will live in the future, highlighting the importance of sustainable practices to not compromise their needs.

Sustainability

The use of resources to enable society to satisfy current needs, without compromising the ability of future generations to meet their needs.

Resources

Assets, materials, or other items of value that are available to an individual or organization to achieve goals or carry out activities.

Zero Emissions

Occur when carbon or polluting emissions are reduced and/or offset so that there is no net addition of emissions that are harmful to the environment or climate, usually by the emitting source.