A Manufacturer of Industrial Equipment Has a Standard Costing System

question 51

Multiple Choice

A manufacturer of industrial equipment has a standard costing system based on direct labour hours (DLHs) as the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below:
$\begin{array}{|l|r|}\hline \text { Denominator Level of Activity } & 9,000 \mathrm{DLHs} \\\hline \text { Overhead Costs at the Denominator Activity Level: } & \\\hline \text { Variable Overhead Cost } & \$ 90,700 \\\hline \text { Fixed Overhead Cost } & \$ 102,800 \\\hline\end{array}$
$\text { The following data pertain to operations for the most recent period: }$
$\begin{array}{|l|r|}\hline \text { Actual Hours } & 7,800 \mathrm{DLHs} \\\hline \text { Standard Hours Allowed for the Actual Output } & 7,765 \mathrm{DLHs} \\\hline \text { Actual Total Variable Overhead Cost } & \$ 54,210 \\\hline \text { Actual Total Fixed Overhead Cost } & \$ 100,200 \\\hline\end{array}$
-Under which product costing system for a manufacturing company would there be no fixed manufacturing overhead volume variance?

• A) Standard absorption costing.
• B) Standard variable costing.
• C) Job order costing.
• D) Process costing.

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Definitions:

Resale Value

The estimated market value at which an asset can be sold in the future.