Cannon Company's Standard Fixed Overhead Cost Is $5 Per Direct

question 6

Multiple Choice

Cannon Company's standard fixed overhead cost is $5 per direct labour hour on the basis of budgeted fixed costs of $500,000. The standard allows one direct labour hour per unit. During the current year, Cannon produced 110,000 units of product, incurred $550,000 of fixed overhead costs, and recorded 212,000 actual hours of direct labour.
-Refer to the Figure.What is the standard activity level on which Cannon based its fixed overhead rate?

• A)50,000 direct labour hours
• B)100,000 direct labour hours
• C)105,000 direct labour hours
• D)110,000 direct labour hours

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Definitions:

Labor Supply

The total hours of work that workers are willing and able to provide at a given wage rate in a certain period.

Unit Elastic

Describes a supply or demand curve where a given percentage change in price causes an equal percentage change in the quantity demanded or supplied.

Elasticity of Labor Supply

A measure of how the quantity of labor supplied changes in response to changes in wages or salaries.

Payroll Tax

A levy placed on either employees or employers, typically determined as a fraction of the wages employers distribute to their workers.