Budgeted Fixed Indirect Costs Remain Constant at $150,000 Per Month

question 152

Multiple Choice

Budgeted fixed indirect costs remain constant at $150,000 per month.During high-output months variable indirect costs are budgeted at $120,000, and during low-output months budgeted variable costs are $60,000.What are the respective high and low indirect cost rates if budgeted professional labour-hours are 6,000 for high-output months and 2,000 for low-output months?

• A)$31.25 per hour, $87.50 per hour
• B)$45.00 per hour, $95.00 per hour
• C)$45.00 per hour, $105.00 per hour
• D)$56.20 per hour, $105.00 per hour
• E)$59.00 per hour, $105.00 per hour

Apply the high-low method to derive cost formulas and understand its application in different scenarios.

Calculate and interpret the margin of safety in both dollar terms and as a percentage.

Understand and calculate the degree of operating leverage and its impact on net operating income.

Apply cost-volume-profit (CVP) analysis in mixed cost settings and understand the effect of sales mix changes on break-even points.

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Definitions:

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Infants categorized based on their age in weeks since the beginning of the mother's last menstrual period, used in assessing preterm or full-term birth status.

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