(Appendix 10A) the Chuba Corporation Uses a Standard Cost System

question 157

Multiple Choice

(Appendix 10A) The Chuba Corporation uses a standard cost system in which manufacturing overhead is applied on the basis of standard direct labor-hours (DLHs) . During December, the company actually used 7,200 direct labor-hours and made 1,900 units of finished product. The standard cost card for one unit of product includes the following data concerning manufacturing overhead:
Variable overhead: 4 DLHs @ $5.25 per DLH
Fixed overhead: 4 DLHs @ $2.00 per DLH
For December, the company incurred $16,550 in fixed manufacturing overhead costs and recorded an $800 unfavorable volume variance.
-The denominator activity level in direct labor-hours used by Chuba in setting the predetermined overhead rate was:

• A) 7,600 hours
• B) 7,800 hours
• C) 8,000 hours
• D) 7,200 hours