Erie Co Uses Machine Hours to Apply Standard Overhead Cost to to Production

question 81

Essay

Erie Co. uses machine hours to apply standard overhead cost to production. The following data pertain to October: $\begin{array}{lr}\text { Master budget data: } & \\\text { Units } & 100,500 \\\text { Total machine hours (denominator volume) } & \$ 250,000 \\\text { Total variable overhead cost } & \$ 50,000\\\text { Actual operating results: }\\\text { Variable overhead cost incurred } & \$ 265,000 \\\text { Fixed overhead cost incurred } & \$ 54,000 \\\text { Units manufactured } & 2,250 \\\text { Total machine hours } & 96,000\end{array}$ Required:
Compute the following variances using machine hours as the activity variable used to assign standard overhead costs to production. Show calculations.
1. Variable overhead spending variance
2. Variable overhead efficiency variance
3. Fixed overhead spending variance
4. Fixed overhead production-volume variance

Analyze the effects of regulation on natural monopolies, focusing on public ownership, pricing, and consumer welfare.

Distinguish between single-price monopoly and price discrimination practices.

Understand the conditions under which a monopoly can practice price discrimination and its impact on markets.

Compare the differences in welfare outcomes between monopolistic and perfectly competitive markets.

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Definitions:

Trial Balance

A bookkeeping report that lists the balances of all ledgers accounts in order to verify that total debits equal total credits.

Financial Statements

Formal records of an entity's financial activities and conditions, including the balance sheet, income statement, and cash flow statement.

Loan Requests

Applications submitted by individuals or entities to a lender, requesting the borrowing of a certain amount of money.

Financial Statements

Formal records of the financial activities and position of a business, person, or other entity, providing an overview of a financial situation in a standardized format.