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:

Financing

is the process of sourcing capital or funds to finance the operations, projects, or investments of an individual, organization, or government.

Limited Liability Corporation

A hybrid business form combining the advantages of the sole proprietorship, partnership, and corporation.

Tax Purposes

The reasons or objectives related to the calculation, payment, or management of taxes as required by law.

Owners' Assets

Refers to the property, both tangible and intangible, that is owned by a business's proprietors.