A small business produces a single product and reports the following data:
The company believes that the volume will go up to 12,000 units if the company reduces its sales price to $7.50.How would this change affect operating income?
Definitions:
Standard Variable Overhead Rate
The predetermined rate at which variable overhead costs are expected to occur relative to a specific activity or cost driver.
Variable Manufacturing Overhead
The portion of manufacturing overhead costs that varies with production volume.
Variable Overhead Efficiency Variance
Variable overhead efficiency variance is the difference between the actual and budgeted variable overhead cost based on the efficient utilization of resources.
Direct Labor-hours
The amount of labor hours that can be directly attributed to the production process, serving as a basis for allocating manufacturing overhead costs in some costing systems.
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