Sussex Company Uses a Standard Cost System and Prepared the Following

question 82

Multiple Choice

Sussex Company uses a standard cost system and prepared the following budget for May when 24,000 machine hours of activity were anticipated: variable overhead, $48,000; fixed overhead: $240,000. Actual data for May were:
Standard machine hours allowed for output attained: 25,000
Actual machine hours worked: 24,000
Variable overhead incurred: $50,000
Fixed overhead incurred: $250,000
The standard variable overhead rate for May is:

• A) $2.00.
• B) $2.08.
• C) $3.00.
• D) $5.00.
• E) $5.21.

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Definitions:

Economies of Scale

Refers to the cost advantages that enterprises obtain due to their scale of operation, leading to a reduction in per-unit cost.

Capital Facilities

Physical assets such as buildings, machinery, and equipment used in the production of goods and services.

Principal-Agent Problems

Conflicts of interests that arise when one party (the agent) is expected to act in the best interest of another (the principal) but has an incentive to act in their own interest.

Monopoly

A market structure characterized by a single seller, selling a unique product in the market with no close substitutes and high barriers to entry.