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

question 106

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.
The total overhead variance in 2019 for Bluecap Co., to the nearest whole dollar, was:

• A) $14,000 unfavorable.
• B) $15,040 favorable.
• C) $17,280 favorable.
• D) $37,840 favorable.
• E) $37,840 unfavorable.

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Definitions:

Net Income

The net income of a company, calculated by deducting all costs, taxes, and expenses from its total revenue.

Accounting Break-even

The point at which a company's total sales equal its expenses, thus resulting in neither profit nor loss, based strictly on accounting figures not considering cash flow.

Variable Cost

Costs that change in proportion to the activity of a business.

Fixed Costs

Fixed expenses unaffected by the volume of production or sales, like rent, insurance, and wages.