Problem: Main Company uses a standard cost system in which it applies manufacturing overhead to its product on the basis of standard direct labor-hours (DLHs). Below is the standard cost card for the product:
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Direct materials, 5 feet at $4.00 per foot.........................
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$20.00
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Direct labor, 2.0 DLHs at $10.00 per DLH.........................
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20.00
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Variable overhead, 3.0 DLHs at $2.00 per DLH...............
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6.00
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Fixed overhead, 3.0 DLHs at $8.00 per DLH...................
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24.00
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$70.00
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Last year, the company produced 6,000 units of product using 17,000 direct labor-hours. The actual total fixed overhead cost for the year was $140,000 and the volume variance was $12,000, favorable.
Required:
1. Compute the total fixed overhead cost that was originally budgeted.
2. Compute the denominator activity figure that the company used in computing predetermined overhead rates