The Claus Company Makes and Sells a Single Product and Uses

Multiple Choice

The Claus Company makes and sells a single product and uses standard costing. During January, the company actually used 8,700 direct labour hours (DLHs) and produced 3,000 units of product. The standard cost card for one unit of product includes the following:

Variable Factory Overhead: 3.0 DLHs @ $4.00 per DLH.
Fixed Factory Overhead: 3.0 DLHs. @ $3.50 per DLH.

For January, the company incurred $22,000 of actual fixed overhead costs and recorded an $875 favourable volume variance.




-What was the denominator level of activity in direct labour hours (DLHs) used by Claus in setting the predetermined overhead rate for January?

A) 8,750 DLHs.
B) 9,250 DLHs.
C) 9,500 DLHs.
D) 10,500 DLHs.