Gina Production Company Uses a Standard Costing System The Factory Overhead Rate Is Based on an Activity Level

question 46

Multiple Choice

Gina Production Company uses a standard costing system.The following information pertains to the current year:
$\begin{array}{llr} \text {Actual factory overhead costs \( (\$ 16,500 \) is fixed) } &\$40,125\\ \text { Actual direct labour costs (11,250 hours) } &\$131,625\\ \text { Standard direct labour for 5,500 units: } &\\ \text {Standard hours allowed } &\text { 11,000 hours} \\ \text {Labour rate } &\$12.00\\\end{array}$
The factory overhead rate is based on an activity level of 10,000 units.Standard cost data for 5,000 units is as follows:
$\begin{array}{lr}\text { Variable factory overhead } & \$ 22,500 \\\text { Fixed factory overhead } & \underline{13,500} \\\text { Total factory overhead } & \underline{\$ 36,000} \\\end{array}$ What is the fixed overhead volume variance for Gina Production Company?

• A)$1,350 (F)
• B)$1,350 (U)
• C)$3,600 (F)
• D)$4,125 (U)

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Definitions:

Future Dividends

Predicted payments made by a corporation to its shareholders out of its earnings in the future.

Stock Split

An action by a company to divide its existing shares into multiple shares to boost the liquidity of the shares, although the firm's overall market capitalization remains unchanged.

Common Stockholders' Equity

The portion of a company's equity that is held by common shareholders, representing ownership interest.

Balance Sheet

A financial statement that displays a company's assets, liabilities, and shareholders' equity at a specific point in time.