Determining the Standard Fixed Factory Overhead Cost Applied to Production

question 80

Multiple Choice

Determining the standard fixed factory overhead cost applied to production for a period involves all the following essential elements except:

• A) The actual amount of fixed overhead cost incurred during the period.
• B) A cost driver (or drivers) for applying the fixed overhead.
• C) The standard fixed overhead application rate.
• D) An assumed output level, as reflected by the quantity of the cost driver for applying the fixed overhead (i.e., the denominator activity level for the period).
• E) The total budgeted fixed overhead cost for the period.

---

Definitions:

Variable Costs

Expenditures that fluctuate based on the volume of output or services provided by an enterprise.

Break-Even Point

The point at which total costs and total revenue are equal, leading to neither profit nor loss.

Sales Mix

Sales mix refers to the proportion of different products or services that a company sells, significantly impacting its overall profitability.

Contribution Margin

The amount remaining from sales revenue after variable expenses have been deducted, indicating how much revenue contributes to fixed costs and profits.