The Ferris Company Applies Manufacturing Overhead Costs to Products on the Basis

question 30

Multiple Choice

The Ferris Company applies manufacturing overhead costs to products on the basis of direct labour hours. The standard cost card shows that 3 direct labour hours are required per unit of product. For August, the company budgeted to work 90,000 direct labour hours and to incur the following total manufacturing overhead costs:
$\begin{array}{l|r|}\hline \text { Total Variable Overhead Costs } & \$ 99,000 \\\hline \text { Total Fixed Overhead Costs } & \$ 118,000 \\\hline\end{array}$
During August, the company completed 28,000 units of product, worked 86,000 direct labour hours, and incurred the following total manufacturing overhead costs:
$\begin{array}{|l|r|}\hline \text { Total Variable Overhead Costs } & \$ 98,900 \\\hline \text { Total Fixed Overhead Costs } & \$ 115,300 \\\hline\end{array}$
The denominator activity used for the predetermined overhead rate was 90,000 direct labour hours.
-For August,what was the fixed overhead volume variance?

• A) $4,300 unfavourable.
• B) $4,980 favourable.
• C) $4,980 unfavourable.
• D) $7,920 unfavourable.

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Definitions:

Marketplace

An open environment for buying and selling goods, services, or ideas, either physically or online.

Ethical Stand

Represents a person's or organization's positioning on moral principles or issues, guiding their behavior and decisions.

Profit

The financial gain obtained when the amount earned from a business activity exceeds the expenses, costs, and taxes needed to sustain the activity.

Strategic Planning

A systematic process of envisioning a desired future and translating this vision into broadly defined goals and a sequence of steps to achieve them.