Megan, Inc

Multiple Choice

Megan, Inc. uses the following standard costs per unit for one of its products: Direct labor (2.0 hrs. @ $5.00/hr.) = $10.00; overhead (2.0 hrs. @ $2.50/hr.) = $5.00. The flexible budget for overhead is $120,000 plus $1.00 per direct labor hour (DLH) . Actual data for the past month show total overhead costs of $225,000, total fixed overhead of $123,000, 85,000 hours worked, and 40,000 units produced.

What is the budgeted denominator activity level for Megan, Inc., in direct labor hours (DLHs) , to the nearest whole number?

A) 24,000.
B) 48,000.
C) 60,000.
D) 80,000.
E) 100,000.