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Ferro Enterprises uses a standard cost system in which it applies manufacturing overhead to units of product on the basis of standard direct labor-hours.During the month of September, the company applied $52,000 in fixed manufacturing overhead cost to units of product.At the end of the month, manufacturing overhead was overapplied by $3,000.If there was no volume variance in September, then the budgeted fixed manufacturing overhead cost for the month was:
A) $49,000
B) $52,000
C) $55,000
D) $58,000
Fixed Manufacturing Overhead
This refers to the consistent costs associated with the manufacturing process that do not vary with the level of production, such as salaries of managers and depreciation of factory equipment.
Overapplied
A situation where the allocated manufacturing overhead cost is greater than the actual overhead incurred.
Volume Variance
A measurement of the difference between the expected volume of production and the actual volume produced, impacting costs.
- Analyze the meaning behind favorable and unfavorable variances within a regulated cost system.
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Learning Objectives
- Analyze the meaning behind favorable and unfavorable variances within a regulated cost system.
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