The Cost Effect of Productivity for Variable Costs Is Calculated

question 103

Multiple Choice

The cost effect of productivity for variable costs is calculated by multiplying the difference in actual input units used to produce current year output and units of input required to produce current year output in previous year by the ________.

• A) price per input unit of previous year
• B) price per unit of capacity in the previous year
• C) price per unit of capacity in the current year
• D) price per input unit of current year

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Definitions:

Direct Materials Cost

The total cost of all the raw materials used in the production of a product or service.

Machine-hours

A measure of the amount of time a machine is operated, used in calculating manufacturing costs and allocating expenses based on machine usage.

Overapplied Overhead

A situation where the allocated or applied manufacturing overhead cost is more than the actual manufacturing overhead cost incurred.

Underapplied Manufacturing Overhead

A situation where the actual manufacturing overhead costs exceed the overhead allocated to products.