An 8 Year Project Is Estimated to Produce a Product

question 90

Multiple Choice

An 8 year project is estimated to produce a product with the following information: selling price = $80 per unit; variable costs are $65 per unit; fixed costs are $20,000; required return is 10%; initial investment = $200,000.Calculate the financial break-even.

• A)3,000
• B)3,833
• C)4,000
• D)4,833

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Definitions:

Variable Manufacturing Overhead

The portion of manufacturing overhead costs that varies with the level of production output, such as utility costs or indirect materials.

Labor Rate Variance

The difference between the actual hourly labor rate and the standard rate, multiplied by the number of hours worked during the period.

Variable Overhead Rate Variance

The difference between the actual variable overhead cost incurred during a period and the standard cost that should have been incurred based on the actual activity of the period.

Materials Price Variance

The difference between a direct material’s actual price per unit and its standard price per unit, multiplied by the quantity purchased.