At Eady Corporation,maintenance Is a Variable Overhead Cost That Is

question 166

Multiple Choice

At Eady Corporation,maintenance is a variable overhead cost that is based on machine-hours.The performance report for July showed that actual maintenance costs totaled $8,650 and that the associated rate variance was $250 unfavorable.If 5,000 machine-hours were actually worked during July,the standard maintenance cost per machine-hour was:

• A) $1.73 per MH
• B) $1.78 per MH
• C) $1.68 per MH
• D) $1.83 per MH

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Definitions:

Normal Profit

The minimum amount of earnings that entrepreneurs must achieve to cover the cost of operating, essentially the breakeven point beyond which a business earns profit.

Implicit Costs

Indirect expenses related to business operations, such as opportunity costs, not directly paid out in cash.

Economic Profits

The excess of total revenue over total costs, including both implicit and explicit costs.

Implicit Costs

Costs that represent the opportunity cost of using resources that are not directly paid for, such as the owner’s time or the use of assets owned by the firm.