The Controller of Menno Corp Presents You with the Following

question 135

Multiple Choice

The controller of Menno Corp presents you with the following observations in a general ledger account called Maintenance:

-Using the high-low method, what is the variable maintenance cost per machine hour at Menno Corp?

• A) $0.35
• B) $0.54
• C) $1.50
• D) $0.67

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Definitions:

Common Cost

A cost that is incurred to support a number of cost objects but that cannot be traced to them individually. For example, the wage cost of the pilot of a 747 airliner is a common cost of all of the passengers on the aircraft. Without the pilot, there would be no flight and no passengers. But no part of the pilot’s wage is caused by any one passenger taking the flight.

Arbitrarily Allocated

The process of distributing amounts in a somewhat random or subjective manner, often used in allocating costs to different departments or projects without a strict formula.

LIFO Inventory

LIFO inventory is a method of inventory valuation where the most recently produced or purchased items are recorded as sold first, potentially reducing taxes in periods of inflation.

Sales Exceed Production

A situation where the demand for a company's products surpasses its current production capacity or available inventory.