Diehl Corporation uses a standard cost system in which it applies manufacturing overhead to units of product on the basis of standard direct labor-hours.The company's total applied factory overhead was $315,000 last year when the company used 32,000 direct labor-hours as the denominator activity.If the variable factory overhead rate was $8 per direct labor-hour, and if 30,000 standard direct labor-hours were allowed for the output of the year, then the total budgeted fixed factory overhead for the year must have been:

A) $60,000
B) $80,000
C) $90,000
D) $100,000

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Alyssa Sanchez · Accepted Answer

Final Answer : B, Explanation :  Overhead applied = Predetermined overhead rate × Standard hours allowed for the actual output$315,000 = Predetermined overhead rate × 30,000 direct labor-hoursPredetermined overhead rate = $315,000 ÷ 30,000 direct labor-hours = $10.50 per direct labor-hourFixed component of the predetermined overhead rate = $10.50 per direct labor-hour - $8.00 per direct labor-hour = $2.50 per direct labor-hour$2.50 per direct labor-hour = Total budgeted fixed factory overhead ÷ 32,000 direct labor-hoursTotal budgeted fixed factory overhead = $2.50 per direct labor-hour × 32,000 direct labor-hours = $80,000

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