Derf Corporation Uses a Standard Cost System in Which It

question 14

Multiple Choice

Derf Corporation uses a standard cost system in which it applies manufacturing overhead on the basis of standard direct labor-hours. Two direct labor-hours are required for each unit produced. The denominator activity was set at 9,000 units. Manufacturing overhead was budgeted at $135,000 for the period; 20 percent of this cost was fixed. The 17,200 hours worked during the period resulted in production of 8,500 units. Variable manufacturing overhead cost incurred was $108,500 and fixed manufacturing overhead cost was $28,000.
-The fixed manufacturing overhead budget variance for the period was:

• A)$6,300 Unfavorable
• B)$2,500 Unfavorable
• C)$1,500 Unfavorable
• D)$1,000 Unfavorable

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Definitions:

Marginal Revenue Product

Incremental income produced from the application of one additional unit of resources such as labor or capital.

Derived Demand

Demand for a commodity, service, etc., that is a consequence of the demand for something else.

Inputs Demand

The requirement for resources and materials necessary to produce goods and services in an economy.

Secondary Demand

The desire for products and services that derive from the demand for another product or service.