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

question 53

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 fixed overhead production volume variance for Bluecap Co. in 2019, to the nearest dollar, was:

• A) $11,280 favorable.
• B) $17,280 favorable.
• C) $28,800 unfavorable.
• D) $34,800 unfavorable.
• E) $51,840 favorable.

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Definitions:

Initial Cost

The acquisition cost of an asset or investment, covering all expenses involved in making the asset operational, including purchase price, installation, and setup.

Payback Period

The time required for an investment to generate income or profits equal to the original cost of investment.

Capital Budgeting

The process of evaluating and selecting long-term investments that are in line with an organization's strategic goal.

Capital Improvements

Long-term investment expenditures made to improve, upgrade, or extend the life of a capital asset, often resulting in increased operational efficiency or capacity.