A Manufacturer of Industrial Equipment Has a Standard Costing System

question 109

Multiple Choice

A manufacturer of industrial equipment has a standard costing system based on standard direct labor-hours (DLHs) as the measure of activity.Data from the company's flexible budget for manufacturing overhead are given below:
$$\begin{array} { | l | r | l | } \hline \text { Level of activity' } & 2,500 & \mathrm { DLHs } \\\hline \text { Overhead costs at the denominator } & & \\\text { activity lev' el: } & & \\\hline \text { Variable overhead cost } & \$ 8,500 & \\\hline \text { Fred overhead cost } & \$ 34,625 & \\\hline\end{array}$$ The following data pertain to operations for the most recent period:
$$\begin{array} { | l | r | r | } \hline \begin{array} { l } \text { Actual hours } \\\text { Standard hours allowed for the actual } \\\text { output }\end{array} & 2,600 & \mathrm { DLHs } \\\hline \begin{array} { l } \text { Actual total variable manufacturing } \\\text { overhead cost }\end{array} & 2,692 & \mathrm { DLHs } \\\hline \begin{array} { l } \text { Actual total fixed manufacturing overhead } \\\text { cost }\end{array} & \$ 9,100 & \\\hline\end{array}$$ What is the predetermined overhead rate to the nearest cent?

• A) $16.97.
• B) $17.25.
• C) $16.59.
• D) $17.65.

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Definitions:

Demand Curve

A diagram that displays the connection between the cost of a commodity and the level of demand for it within a set timeframe.

Producer Surplus

The difference between what producers are willing to accept for a good or service versus what they actually receive, measured above the supply curve to the equilibrium price.

Price Floor

A government-imposed minimum price charged for a good or service, intended to prevent prices from falling below a certain level to protect producers or market sectors.

Producer Surplus

The difference between the amount producers are willing to accept for a good or service versus the amount they actually receive in the market.