Raff Co Has a Standard Cost System in Which Manufacturing Overhead

question 129

Multiple Choice

Raff Co. has a standard cost system in which manufacturing overhead is applied to units of product on the basis of direct labour hours (DLHs) . The following standards are based on 100,000 direct labour hours:
$\begin{array}{l|l|}\hline \text { Variable Overhead } & 2 \text { DLHs @ \$3 per DLH }=\$ 6 \text { per unit } \\\hline \text { Fixed Overhead } & 2 \text { DLHs @ \$4 per DLH }=\$ 8 \text { per unit } \\\hline\end{array}$
The following information pertains operations during March:
$\begin{array}{|l|r|}\hline \text { Units Actually Produced } & 38,000 \\\hline \text { Actual Direct Labour Hours Worked } & 80,000 \\\hline\end{array}$

$\begin{array}{|l|r|}\hline \text { Actual Manufacturing Overhead Incurred: } & \\\hline \text { Variable Overhead } & \$ 250,000 \\\hline \text { Fixed Overhead } & \$ 384,000 \\\hline\end{array}$
-For March,what was the fixed overhead volume variance?

• A) $80,000 favourable.
• B) $80,000 unfavourable.
• C) $96,000 favourable.
• D) $96,000 unfavourable.

Identify conditions under which a firm should continue producing or shut down in the short run.

Analyze the impact of market price changes on a firm's production decisions and profits in a perfectly competitive market.

Understand the relationship between price, average cost, and marginal cost in the short run supply decisions.

Recognize the short-run supply curve of a purely competitive producer and its determinants.