Point Company Uses the Standard Costing Method

question 42

Multiple Choice

Point Company uses the standard costing method. The company's main product is a fine-quality audio speaker that normally takes 0.25 hour to produce. Normal annual capacity is 3,000 direct labor hours, and budgeted fixed overhead costs for the year were $6,750. During the year, the company produced and sold 8,000 units. Actual fixed overhead costs were $4,800. Compute the fixed overhead budget variance.

• A) $300 (F)
• B) $300 (U)
• C) $1,950 (F)
• D) $1,950 (U)

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Definitions:

Cooling Coil

A device within an air handling unit or HVAC system used to lower air temperature and remove moisture by passing air over a cold surface.

Fixed Overhead Budget Variance

The difference between the actual fixed overhead costs incurred and the expected (budgeted) costs.

Standard Cost System

An accounting practice that uses predetermined costs for products or services to help managers control expenditures by comparing these standards with actual costs.

Commercial Refrigerators

Cooling appliances designed for commercial use to store perishable goods at required temperatures to prevent spoilage.