Question
ABC Company uses a standard absorption costing system that allocates overhead on the basis of direct labor hours. Here is their Statement of Gross Margin:
ABC Company uses a standard absorption costing system that allocates overhead on the basis of direct labor hours. Here is their Statement of Gross Margin:
Statement of Gross Margin Standard Revenue 1,000,000 Sales price variance (30,000)
Sales volume variance 60,000 Net revenue 1,030,000
CGS @ Standard 700,000 Total direct labor variance 30,000
Direct materials price variance (50,000) Direct materials quantity variance 40,000
Fixed overhead budget variance 50,000 Fixed overhead volume variance (100,000)
Variable overhead spending variance 20,000 Variable overhead efficiency variance (80,000)
Adjusted Cost of Goods Sold 610,000 Gross Margin 420,000
Indicate whether the following statement is true or false. The firm has over-applied fixed overhead. True or False?
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