Able Control Company, Which Manufactures Electrical Switches, Uses a Standard

question 49

Multiple Choice

Able Control Company, which manufactures electrical switches, uses a standard cost system in which manufacturing overhead costs are applied to units of product on the basis of standard direct labor-hours (DLHs) . The standard overhead costs are shown below: *Based on 300,000 DLHs per month.

The following information is available for the month of October:

• Plans called for the production of 60,000 switches.
• 56,000 switches were actually produced.
• 275,000 direct labor-hours were worked at a total cost of $2,550,000.
• Actual variable manufacturing overhead costs were $2,340,000.
• Actual fixed manufacturing overhead costs were $3,750,000.
-The fixed manufacturing overhead budget variance for October was:

• A)$48,000 Unfavorable
• B)$150,000 Unfavorable
• C)$300,000 Favorable
• D)$390,000 Unfavorable

---

Definitions:

Low Sacrifice Ratio

A condition indicating that an economy can reduce inflation with a relatively small decrease in economic output or increase in unemployment.

Inflation Rate

The rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling.

Central Bank

An institution that manages a country's currency, money supply, and interest rates. Central banks also oversee the commercial banking system of their respective countries.

Sacrifice Ratio

The sacrifice ratio measures the cost of reducing inflation in terms of the percentage of GDP lost per each percentage point decrease in inflation.