At Rost Corporation, Indirect Labor Is a Variable Cost That

question 469

Multiple Choice

At Rost Corporation, indirect labor is a variable cost that varies with direct labor-hours. Last month's performance report showed that actual indirect labor cost totaled $7,540 for the month and that the associated spending variance was $560 F. If 10,800 direct labor-hours were actually worked last month, then the flexible budget cost formula for indirect labor must be (per direct labor-hour) closest to:

• A) $0.75
• B) $0.80
• C) $0.85
• D) $0.65

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Definitions:

Traditional Costing Method

A costing methodology that allocates overhead costs to products based on volume-related measures, such as machine hours or labor hours.

Direct Labor-Hours

The complete number of hours dedicated to the direct production of goods.

Overhead Assigned

The allocation of indirect costs to specific jobs or production activities based on a predetermined formula or method.

Traditional Costing

An accounting method that applies indirect costs to products based on a predetermined overhead rate, typically simpler than activity-based costing.