Figure 3-6

question 128

Multiple Choice

Figure 3-6. Taran Company incurred the following costs for the months of January and February.
Refer to Figure 3-6.Assume that output was 5,000 units in January and 10,000 units in February,utility cost is a mixed cost,and the fixed cost of utilities was $3,000.What was the variable rate per unit of output for utilities cost?

• A)$.60
• B)$.40
• C)$.20
• D)$.30

---

Definitions:

Residual Value

The estimated amount that an asset is expected to realize upon its disposal at the end of its useful life.

Annual Depreciation

The portion of the total cost of a tangible asset that is expensed each year over its useful life.

Book Value

A rephrased definition: The net value of an asset or liability recorded on the financial statements, factoring in depreciation, amortization, and impairment, but not necessarily indicative of market value.

Activity-Based Method

An accounting method that assigns costs to products or services based on the activities and resources that go into producing them, to more accurately reflect the costs associated with each product or service.