If Annual Demand Is 24,000 Units, Orders Are Placed Every

question 61

Multiple Choice

If annual demand is 24,000 units, orders are placed every 0.5 months, and the cost to place an order is $50, what is the annual ordering cost?

• A) $50
• B) $1,200,000
• C) $2,400,000
• D) $1,200
• E) $600,000

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Definitions:

Labor Rate Variance

The difference between the expected cost of labor per unit of production and the actual cost, often used to identify efficiency and wage rate changes.

Variable Overhead Efficiency Variance

The difference between the actual variable overhead incurred and the standard cost allocated for the actual production volume, resulting from efficiency in variable overhead resource usage.

Variable Overhead Rate Variance

The difference between the actual variable overhead incurred and the standard cost of variable overhead allocated for the actual production level.

Variable Overhead Rate Variance

The difference between the actual variable overhead incurred and the expected (standard) variable overhead based on actual production levels.