Fletcher Company Collected the Following Data Regarding Production of One

question 118

Multiple Choice

Fletcher Company collected the following data regarding production of one of its products. Compute the variable overhead spending variance. $\begin{array}{lll}\text { Direct labor stendard (2 hrs. @ } \$ 12.75 / \mathrm{hr} \text {.) } & \$ 25.50 &\text {per finished unit}\\\text { Actual direct labor hours } & 81,500&\text { hrs}\\\text { Budgeted units } & 42,000&\text {units}\\\text {Actual finished units produced}&40,000&\text {units}\\\text {Standad variable OH rate (2 hrs. @ \$14.30/hr) }&\$28.60&\text {per finished unit}\\\text {Standard fixed OH rate \( (\$ 336,000 / 42,000 \) units) }&\$8.00 &\text {per unit}\\\text {Actual cost of variable overhead costs incurred}&\$1,140,000\\\text {Actual cost of fixed overhead costs incurred} &\$ 338,000 \end{array}$

• A) $4,000 favorable.
• B) $21,450 favorable.
• C) $4,000 unfavorable.
• D) $21,450 unfavorable..
• E) $25,450 favorable.

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Definitions:

Customer Service Level

A measure of the quality of service provided to customers, often evaluated through metrics like response time, satisfaction rates, and resolution effectiveness.

Lot Size

The quantity of units produced or purchased in a single batch or order, affecting production costs and inventory levels.

Cost of Overstocking

The expenses associated with holding excessive inventory, such as storage costs, insurance, and potential obsolescence.

Cost of Understocking

The financial losses and opportunity costs incurred from not having sufficient inventory to meet demand, including lost sales and customer dissatisfaction.