fixed manufacturing overhead managerial accounting

Question

I need detailed help with steps on this two-part problem, the answers were C) and B) respectively but I need assistance with steps as to why :

 

The Hawkins Company uses a standard costing system in which manufacturing overhead is applied on the basis of standard direct labor hours. During February, the company actually used 9,200 direct labor hours and made 2,900 units of finished product. The standard cost card for one unit of product includes the following :

Variable factory overhead : 3 Direct labor hours at $4.75 per Direct Labor Hour

Fixed Factory Overhead : 3 direct labor hours at $3.00 per direct labor hour

 

For February, the company incurred $28,450 in fixed manufacturing overhead costs and recorded a $900 favorable volume variance.

 

Question 1) The amount of fixed manufacturing overhead cost contained in the company's budget for February is ?

A) 27,000 B) 27,550 C) 25,200 D) 29,350 E) None

 

Question 2) The denominator activity level in direct labor hours used by Hawkins in setting the predetermined overhead rate for February is ?

A) 9,300 B) 8,400 C) 9,000 D) 8,700 E) None

Answer 1

The answer to question 1) is option c) 25,200

 

The standard Fixed Factory OH is 3DLH X $3= $9 per unit X2900 units produced = $26,100

For February the company recorded 900 favorable volume variance, therefore the 

budgeted units must be lower than what actually produced so 900Fav represents 900/9=100 units less in the budget.

So the budgeted over head cost for February was 2900Actual -100= 2800 budgeted units X 9= 25,200.

The answer to question 2) is option b)

 

The denominator in direct labor hours used to arrive at February OH rate is budgeted units 2800 X 3DLH= 8,400 DLH