The denominator activity level in direct labor-hours used by Chuba in setting the predetermined overhead rate was:

A) 7,600 hours
B) 7,800 hours
C) 8,000 hours
D) 7,200 hours

Question

The denominator activity level in direct labor-hours used by Chuba in setting the predetermined overhead rate was:A) 7,600 hoursB) 7,800 hoursC) 8,000 hoursD) 7,200 hours

Rashel garcia · Accepted Answer

Final Answer : C, Explanation :  The activity level in direct labor-hours used by Chuba in setting the predetermined overhead rate can be found by looking at the denominator in the calculation of the predetermined overhead rate:Predetermined overhead rate = Estimated total manufacturing overhead cost / Estimated total direct labor-hours$304,000 / 8,000 hours = $38 per direct labor-hourTherefore, choice (C) 8,000 hours is the correct answer. Volume variance = Fixed component of the predetermined overhead rate x (Denominator hours - Standard hours allowed for the actual output)$800 U = $2.00 per DLH × [Denominator hours - (4.0 DLHs per unit × 1,900 units)]$800 = $2.00 per DLH × [Denominator hours - (4.0 DLHs per unit × 1,900 units)]$800 = $2.00 per DLH × [Denominator hours - (7,600 DLHs)]$800 = ($2.00 per DLH × Denominator hours)- $15,200$2.00 per DLH × Denominator hours = $15,200 + $800$2.00 per DLH × Denominator hours = $16,000Denominator hours = $16,000 ÷ $2.00 per DLH = 8,000 DLHs

The denominator activity level in direct labor-hours used by Chuba in setting the predetermined overhead rate was:

A) 7,600 hours
B) 7,800 hours
C) 8,000 hours
D) 7,200 hours

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