The Ferris Company Applies Manufacturing Overhead Costs to Products on the Basis

question 27

Multiple Choice

The Ferris Company applies manufacturing overhead costs to products on the basis of standard direct labor-hours. The standard cost card shows that 3 direct labor-hours are required per unit of product. For August, the company budgeted to work 90,000 direct labor-hours and to incur the following total manufacturing overhead costs: During August, the company completed 28,000 units of product, worked 86,000 direct labor-hours, and incurred the following total manufacturing overhead costs: The denominator activity in the predetermined overhead rate is 90,000 direct labor-hours.
-For August, the variable overhead rate variance is:

• A) $4,300 F
• B) $4,300 U
• C) $6,500 F
• D) $6,500 U

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Definitions:

Chain Reaction

A sequence of reactions where a reactive product or by-product causes additional reactions to take place.

Recessionary Gap

The gap that occurs when an economy's actual output is less than its potential output, indicating underutilized resources.

Federal Budget

A financial statement of the government's estimated revenue and expenditure for a specific fiscal year.

Budget Surpluses

A situation where income or receipts exceed expenditures over a specified period of time.