Diamond Company manufactures a single product: Product A, at its western plant. The corporate planning staff has projected the following annual sales and production plan for Product A over the company's five year planning horizon:

Maximum production capacity at the western plant is 70,000 direct labor hours. However, due to plant shutdowns for repair, holidays, vacations, and other factors, the greatest attainable production capacity level is 56,000 direct labor hours. Production standards call for 2.5 hours of direct labor for each unit of Product A. During the upcoming year (20X1), the budgeted fixed factory overhead at the western plant is \(\$ 350,000\)
{Required:}
Compute the standard fixed overhead application rate for \(20 \mathrm{X} 1\) assuming Diamond uses as its activity level:

(a) Ideal capacity.

(b) Practical capacity.

(c) Normal capacity.

(d) Expected annual capacity.

Transcribed Image Text:

20X1 20,000 units 20X2 16,500 units 20X3 15,500 units 20X4 17,600 units 20X5 19,400 units