Birkner Corporation's Flexible Budget Performance Report for Last Month Shows

question 3

Multiple Choice

Birkner Corporation's flexible budget performance report for last month shows that actual indirect materials cost, a variable cost, was $30,444 and that the spending variance for indirect materials cost was $8,142 favorable. During that month, the company worked 17,700 machine-hours. Budgeted activity for the month had been 18,200 machine-hours. The cost formula per machine-hour for indirect materials cost must have been closest to:

• A) $1.23
• B) $1.26
• C) $2.12
• D) $2.18

Differentiate between explicit costs, implicit costs, and the importance of including both in economic cost calculations.

Understand the relationships between total product, marginal product, average product, and their implications for production decisions.

Recognize the principle of economies of scale, diseconomies of scale, and the concept of minimum efficient scale.

Learn about the law of diminishing returns and its assumptions.

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Definitions:

Machine Hours

A measure of production activity or cost allocation based on the number of hours machines are operated in the manufacturing process.

Product Cost Distortions

Inaccuracies in the allocation of manufacturing overhead to products, often resulting from using outdated or overly simplified costing methods.

Impact On Pricing

The effect various factors have on the determination of the selling price of a product or service.

Market Prices

The current price at which an asset or service can be bought or sold in the marketplace.