A Business Pays Its Insurance Premium of $2,400 on November

question 83

Multiple Choice

A business pays its insurance premium of $2,400 on November 1 of each year.On January 1 of the new year (after December 31 adjustments) ,the Prepaid insurance account has a debit balance of:

• A) $1,200.
• B) $400.
• C) $2,400.
• D) $2,000.

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Definitions:

Variable Overhead Rate

The ratio of variable overhead costs to a related activity driver, often used in cost accounting.

Overhead Efficiency

A measurement of how effectively a company uses its overhead costs in generating revenue.

Fixed Overhead Budget

A plan for the fixed costs involved in operating a business, which do not vary with levels of production or sales.

Standard Machine-Hours

The predetermined amount of time that machines are expected to operate to produce a set quantity of goods.