Ofarrell Snow Removal's Cost Formula for Its Vehicle Operating Cost

question 89

Multiple Choice

Ofarrell Snow Removal's cost formula for its vehicle operating cost is $1,840 per month plus $377 per snow-day. For the month of November, the company planned for activity of 14 snow-days, but the actual level of activity was 19 snow-days. The actual vehicle operating cost for the month was $9,280. The vehicle operating cost in the flexible budget for November would be closest to:

• A) $9,003
• B) $7,118
• C) $9,280
• D) $9,660

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Definitions:

Allocation

Allocation involves distributing or assigning costs, resources, or revenues among various accounts, departments, or products based on specific criteria or formulas.

Journal Entry

A record in accounting that represents the recording of a financial transaction, consisting of debits and credits that must balance.

Manufacturing Overhead Costs

Indirect costs related to manufacturing, including costs associated with operating the factory outside of direct materials and labor.

Machine-Hours

The total operational hours of machinery used in the production process, often used as a basis for allocating manufacturing overhead costs.