Alka Corporation Manufactures Industrial-Sized Gas Furnaces and Uses Budgeted Machine-Hours

question 130

Multiple Choice

Alka Corporation manufactures industrial-sized gas furnaces and uses budgeted machine-hours to allocate variable manufacturing overhead.The following information pertains to the company's manufacturing overhead data: $\begin{array}{lr}\text { Budgeted output units } & 29,000 \text { urits } \\\text { Budgeted machine-hours } & 10,150 \text { hours } \\\text { Budgeted variable manufacturing overhead costs for } 29,000 \text { units } & \$ 324,800 \\\text { Actual output units produced } & 31,000 \text { urits } \\\text { Actual machine-hours used } & 14,400 \text { hours } \\\text { Actual variable manufacturing overhead costs } & \$ 333,250\end{array}$ What is the budgeted variable overhead cost rate per output unit?

• A) $11.70
• B) $11.75
• C) $11.20
• D) $11.00

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Definitions:

Average Variable Cost

The per unit cost of production that varies with the level of output, including costs such as labor and materials.

Diminishing Returns

A principle stating that if one factor of production is increased while others are held constant, the overall returns will eventually decrease after a certain point.

Variable Cost

Costs that vary directly with the level of production or output, such as materials and labor used in the production process.

Output

The total amount of goods and services produced by an economy, company, or machine over a specified period.