Zero Company's Standard Factory Overhead Application Rate Is $3

Multiple Choice

Zero Company's standard factory overhead application rate is $3.75 per direct labor hour (DLH) , calculated at 90% capacity = 900 standard DLHs. In December, the company operated at 80% of capacity, or 800 standard DLHs. Budgeted factory overhead at 80% of capacity is $3,150, of which $1,350 is fixed overhead. For December, the actual factory overhead cost incurred was $3,800 for 840 actual DLHs, of which $1,300 was for fixed factory overhead.

If Zero Company uses a two-way breakdown (decomposition) of the total overhead variance, what is the total factory overhead flexible-budget variance for December (to the nearest whole dollar) ?

A) N/A—this variance doesn't exist under a two-way breakdown of the total overhead variance.
B) $225 favorable.
C) $425 unfavorable.
D) $650 unfavorable.
E) $690 unfavorable.