Dearden Corporation Uses a Job-Order Costing System with a Single

question 244

Multiple Choice

Dearden Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on machine-hours. The company based its predetermined overhead rate for the current year on total fixed manufacturing overhead cost of $144,000, variable manufacturing overhead of $2.00 per machine-hour, and 60,000 machine-hours. The predetermined overhead rate is closest to:

• A) $2.40 per machine-hour
• B) $6.40 per machine-hour
• C) $4.40 per machine-hour
• D) $2.00 per machine-hour

---

Definitions:

Fixed Costs

Costs that do not vary with the volume of production or sales, such as rent, salaries, and insurance premiums.

Variable Costs

Expenses that change in proportion to the amount of goods produced or the volume of sales, including labor and materials.

Operating Leverage

Operating leverage is a measure of how revenue growth translates into growth in operating income, highlighting the scalability of a company’s business model.

Variable Costs

Expenses that vary in relation to the amount of output or business operations.