Gilder Corporation Makes a Product with the Following Standard Costs

question 173

Multiple Choice

Gilder Corporation makes a product with the following standard costs: The company reported the following results concerning this product in June. The company applies variable overhead on the basis of direct labor-hours.The direct materials purchases variance is computed when the materials are purchased. The variable overhead rate variance for June is:

• A)$330 U
• B)$330 F
• C)$306 U
• D)$306 F

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Definitions:

Total Costs

The sum of all expenses incurred in the production of goods or services, including direct and indirect costs, both variable and fixed.

Step-Down Method

A method of allocating costs whereby one service department’s cost is allocated to all remaining service departments and operating departments, and so on, until all service department costs are allocated to final products.

Death Spiral

A situation occurring when transfer prices include fixed costs and users reduce their use of the internal product or service. This further increases the transfer price (based on average cost) and more users reduce their demand.