Herman Company, Which Applies Overhead to Production on the Basis

question 83

Multiple Choice

Herman Company, which applies overhead to production on the basis of machine hours, reported the following data for the period just ended:
Actual units produced: 13,000
Actual fixed overhead incurred: $742,000
Standard fixed overhead rate: $15 per hour
Budgeted fixed overhead: $720,000
Planned level of machine-hour activity: 48,000
If Herman estimates four hours to manufacture a completed unit, the company's fixed-overhead budget variance would be:

• A) $22,000 favorable.
• B) $22,000 unfavorable.
• C) $60,000 favorable.
• D) $60,000 unfavorable.
• E) None of the other answers are correct.

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Definitions:

Spade

A tool with a broad, flat blade, typically used for digging or cutting earth.

Standard Deck

Refers to a complete set of playing cards typically consisting of 52 cards, divided into four suits: hearts, diamonds, clubs, and spades.

Probability

An event's occurrence probability measured by a number ranging from 0 to 1.

Heart

A muscular organ in most animals, which pumps blood through the blood vessels of the circulatory system.