Web Company Uses a Standard Cost System in Which Manufacturing

question 76

Multiple Choice

Web Company uses a standard cost system in which manufacturing overhead is applied to units of product on the basis of standard machine-hours. During February, the company used a denominator activity of 80,000 machine-hours in computing its predetermined overhead rate. However, only 75,000 standard machine-hours were allowed for the month's actual production. If the fixed manufacturing overhead volume variance for February was $6,400 unfavorable, then the total budgeted fixed manufacturing overhead cost for the month was:

• A) $96,000
• B) $102,400
• C) $100,000
• D) $98,600

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Definitions:

Variable Costs

Costs that vary directly with the level of production or sales, like raw materials and labor.

Economic Profit

The financial gain that exceeds both the total opportunity costs of production and the accounting costs, reflecting the additional value created from business activities.

Accounting Profit

The profit a company has after deducting all its expenses from its total revenue.

Verizon Wireless

A major American telecommunications company known for providing wireless products and services.