DBC Company Applies Fixed Overhead at $8 Per Machine Hour

question 15

Multiple Choice

DBC Company applies fixed overhead at $8 per machine hour. During the year actual fixed overhead amounted to $75 000 and the standard machine hours allowed for units produced was 11 000. Budgeted fixed overhead was $80 000. Which of the following is the best description of the items used to calculate the volume variance?

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Definitions:

Finished Goods

Items that are ready after production but still await sale or delivery to consumers.

Underapplied Manufacturing Overhead

Occurs when the allocated manufacturing overhead costs are less than the actual overhead costs.

Overapplied Manufacturing Overhead

A situation where the allocated manufacturing overhead costs exceed the actual overhead costs incurred during a period.

Direct Materials Cost

The total cost of raw materials directly involved in the manufacturing of a product.