Heroman Corporation Applies Manufacturing Overhead to Products on the Basis

question 2

Multiple Choice

Heroman Corporation applies manufacturing overhead to products on the basis of standard machine-hours.The budgeted fixed manufacturing overhead cost for the most recent month was $26,550 and the actual fixed manufacturing overhead cost for the month was $26,570.The company based its original budget on 5,900 machine-hours.The standard hours allowed for the actual output of the month totaled 5,750 machine-hours.What was the overall fixed manufacturing overhead budget variance for the month?

• A)$20 unfavorable
• B)$675 favorable
• C)$20 favorable
• D)$675 unfavorable

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Definitions:

Fixed Manufacturing Overhead

Costs associated with production that do not vary with the level of output, such as salaries of managers and rent for factory buildings.

Absorption Costing

An accounting method that includes all manufacturing costs—direct materials, direct labor, and both variable and fixed overhead—in the cost of a product.

Product Cost

Product cost refers to the total costs incurred to create a product, including direct labor, direct materials, and allocated overhead expenses, crucial for pricing and profitability analysis.

Unit Costs

The total expense incurred to produce, store, and sell one unit of a product or service.