Answer the Following Questions Using the Information Below

question 153

Multiple Choice

Answer the following questions using the information below:
Dr. Charles Hunter, MD, performs a certain outpatient procedure for $1,000. His fixed costs are $20,000, while his variable costs are $500 per procedure. Dr. Hunter currently plans to perform 200 procedures this month.
-What is the margin of safety assuming 100 procedures are budgeted?

• A)$40,000 or 40 times
• B)$50,000 or 50 times
• C)$60,000 or 60 times
• D)$100,000 or 100 times

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Definitions:

Unit Product Cost

The cost assigned to a single unit of product, combining direct materials, direct labor, and manufacturing overhead expenses.

Predetermined Overhead Rate

A rate calculated before a period begins, used to allocate manufacturing overhead costs to individual products based on a common activity base.

Markup

The amount added to the cost price of goods to cover overhead and profit.

Manufacturing Cost

The total expense incurred in the process of producing goods, including materials, labor, and overhead.