Fixed Costs Remain Constant at $400,000 Per Month

question 181

Multiple Choice

Fixed costs remain constant at $400,000 per month.During high-output months variable costs are $320,000,and during low-output months variable costs are $80,000.What are the respective high and low indirect-cost rates if budgeted professional labor-hours are 16,000 for high-output months and 4,000 for low-output months?

• A) $45.00 per hour; $120.00 per hour
• B) $45.00 per hour; $45.00 per hour
• C) $25.00 per hour; $20.00 per hour
• D) $56.20 per hour; $120.00 per hour

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Definitions:

Intangible Capital Asset

Non-physical assets, such as patents, copyrights, trademarks, and goodwill, that have value due to the rights or advantages they bring to a business.

Consolidated Financial Statement

A comprehensive financial report that combines the financial results of a parent company and its subsidiaries, presenting it as a single economic entity.

Fair Value Increment

The increase in the fair value of an asset over its previous book value, often recognized in the course of business combinations or revaluations.

Capital Assets

Long-term assets acquired or owned by a company that are used in its operations to generate income.