Milano Company Has an Average Overhead Cost Per Hour of $10.50

question 29

Multiple Choice

Milano Company has an average overhead cost per hour of $10.50 at 3,500 machine hours, and at 3,000 hours it is $11.25. The company managers wish to estimate the overhead cost function. What is the variable overhead cost per machine hour?

• A) $1.00
• B) $2.00
• C) $6.00
• D) $8.00

---

Definitions:

Perpetual Inventory System

An inventory accounting system that employs computerized point-of-sale systems and enterprise asset management software to instantly register the purchase or sale of inventory items.

Gross Method

A method of recording purchases at the gross invoice amount before any discounts are applied.

Credit Terms

Conditions under which credit will be extended to a borrower, including repayment schedule, interest rate, and the duration of the loan.

Perpetual Inventory System

An inventory management system that tracks inventory levels in real-time, updating with every sale or purchase transaction.