Bluecap Co

Multiple Choice

Bluecap Co.uses a standard cost system and flexible budgets for control purposes.The following budgeted information pertains to 2010:
During 2010,Bluecap worked 28,000 direct labor hours and manufactured 9,600 units.The actual factory overhead was $14,000 greater than the flexible budget amount for the units produced,of which $6,000 was due to fixed factory overhead.In preparing a budget for 2011 Bluecap decided to raise the level of operation to 90% of capacity,to manufacture 9,000 units at a budgeted total of 27,000 direct labor hours.Under the assumption that the total budgeted fixed overhead for 2011 is the same as it was for 2010,what is the standard fixed overhead application rate per direct labor hour for 2011?

A) $4.30.
B) $4.50.
C) $6.90.
D) $9.30.
E) $9.60.