If the Best Operating Level of a Piece of Equipment

question 6

Multiple Choice

If the best operating level of a piece of equipment is at a rate of 400 units per hour and the actual output during an hour is 300 units, which of the following is the capacity cushion?

• A) 25 percent
• B) 100 units per hour
• C) 75 percent
• D) 125 percent
• E) 133 percent

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Definitions:

Machine Hours

A measurement of the amount of time a machine is operated during a given period.

Variable Manufacturing Overhead

Costs of manufacturing that vary with the level of production, such as supplies and utilities used in the production process.

Job A496

This is a reference to a specific task, project, or work order within a job costing system, identified by the code A496.

Predetermined Overhead Rate

A rate used to allocate manufacturing overhead costs to individual products or job orders, based on a formula that estimates the costs.