Point Company Uses the Standard Costing Method

question 42

Multiple Choice

Point Company uses the standard costing method. The company's main product is a fine-quality audio speaker that normally takes 0.25 hour to produce. Normal annual capacity is 3,000 direct labor hours, and budgeted fixed overhead costs for the year were $6,750. During the year, the company produced and sold 8,000 units. Actual fixed overhead costs were $4,800. Compute the fixed overhead budget variance.

• A) $300 (F)
• B) $300 (U)
• C) $1,950 (F)
• D) $1,950 (U)

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Definitions:

Net Present Value

A calculation that compares the value of all cash inflows and outflows of a project or investment using a discount rate to present day.

Internal Rate

Often shorthand for Internal Rate of Return (IRR), this is a metric used in financial analysis to estimate the profitability of potential investments.

Crossover Point

Crossover Point refers to the level of activity or the time at which two options have the same cost or benefit, making them indifferent choices.

Mutually Exclusive

Situations or events that cannot occur at the same time, where the occurrence of one event precludes the occurrence of the other.