[ 3 ]A manufacturer uses a standard cost system with overhead applied based upon direct labor hours. The manufacturing budget for the production of 5,000

[ 3 ] A manufacturer uses a standard cost system with overhead applied based upon direct labor hours. The manufacturing budget for the production of 5,000 units for the month of May included the following information:

Direct labor

10,000 hours at $15 per hour

$150,000

Variable overhead

30,000

Fixed overhead

80,000

During May, 6,000 units were produced and the fixed overhead budget variance was $2,000 favorable. Fixed overhead during May was

A.

Underapplied by $2,000.

B.

Underapplied by $16,000.

C.

Overapplied by $16,000.

 

D.

Overapplied by $18,000.