Question

Crawford Company's standard fixed overhead rate is $6.00 per direct labor hour based on budgeted fixed costs of $600,000. The standard allows 1 direct labor hour per unit. During the year, Crawford produced 110,000 units of product, incurred $630,000 of fixed overhead costs, and recorded 212,000 actual hours of direct labor. What is the activity level on which Crawford based its fixed overhead rate? a.50,000 direct labor hours b.100,000 direct labor hours c.110,000 direct labor hours d.105,000 direct labor hours

Answer 1

b.100,000 direct labor hours

Step-by-step explanation:

Predetermined Overhead Rate = Budgeted Overheads / Budgeted Activity

Therefore,

Budgeted Activity = Budgeted Overheads / Predetermined Overhead Rate

= $600,000 / $6.00

= 100,000 hours

Answer 2

b.100,000 direct labor hours

Step-by-step explanation:

Standard labor hours required

= Total fixed costs / Fixed overhead rate per labor hour

= $600,000 / $6

= 100,000 labor hours

Standard activity level

= Standard labor hours required in total / Standard labor hours per unit

= 100,000 / 1

= 100,000 units