Bluecap Co

question 28

Multiple Choice

Bluecap Co.uses a standard cost system and flexible budgets for control purposes.The following budgeted information pertains to 2010:
During 2010,Bluecap worked 28,000 direct labor hours and manufactured 9,600 units.The actual factory overhead 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 2011 Bluecap decided to raise the level of operation to 90% of capacity,to manufacture 9,000 units at a budgeted total of 27,000 direct labor hours.Under the assumption that the total budgeted fixed overhead for 2011 is the same as it was for 2010,what is the standard fixed overhead application rate per direct labor hour for 2011?

• A)$4.30.
• B)$4.50.
• C)$6.90.
• D)$9.30.
• E)$9.60.

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Definitions:

Geographic Concentration

The phenomenon of economic activity or specific industries clustering in specific regions or areas.

X-Inefficiency

Occurs when a firm fails to utilize its resources efficiently, due to factors like lack of competitive pressure or managerial inefficiencies.

Homogeneous Product

A product that is considered identical or nearly identical to another product from a different producer.

Pure Competition

A market structure characterized by a large number of small firms, homogeneous products, and free entry and exit.