Maintenance Expenses of a Company Are to Be Analyzed for Purposes

question 34

Multiple Choice

Maintenance expenses of a company are to be analyzed for purposes of constructing a flexible budget. Examination of past records disclosed the following costs and volume measures: $\begin{array}{lrr} & \text { Highest } & \text { Lowest } \\\text { Cost per month } & \$ 86,000 & \$ 74,000 \\\text { Machine hours } & 96,000 & 66,000\end{array}$ Using the high-low-point method of analysis, the estimated variable cost per machine hour is:

• A) $0.40
• B) $0.20
• C) $0.90
• D) $0.10
• E) $0.70

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Definitions:

Property Tax Expense

The amount paid by property owners to municipal or local governments based on the assessed value of their property.

Controllable Cost

An expense that can be directly controlled or influenced by a manager or decision maker within a specific timeframe.

Manufacturing Department

A specific division within a company where goods are produced, focusing on the transformation of raw materials into finished products.

Absorption Costing

An accounting method that includes all manufacturing costs — direct materials, direct labor, and both variable and fixed manufacturing overhead — in the cost of a product.