The Standard Factory Overhead Rate Is $7

question 72

Multiple Choice

The standard factory overhead rate is $7.50 per machine hour ($6.20 for variable factory overhead and $1.30 for fixed factory overhead) based on 100% capacity of 80,000 machine hours. The standard cost and the actual cost of factory overhead for the production of 15,000 units during August were as follows: What is the amount of the factory overhead controllable variance?

• A) $12,000 unfavorable
• B) $12,000 favorable
• C) $14,000 unfavorable
• D) $26,000 unfavorable

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Definitions:

Income Summary

An account used in closing process to collect all revenue and expense account balances before determining net income or loss.

Debit Balance

The condition where the total debits exceed the total credits in an account, typically indicating assets or expenses.

Credit Balance

A balance in a financial account that indicates the amount of money owed to a creditor or the account holder; it is the opposite of a debit balance.

Closing Entries

Journal entries made at the end of an accounting period to transfer the balances from temporary accounts to permanent accounts, preparing the books for the next period.