Peterson Inc

question 77

Multiple Choice

Peterson Inc. uses direct labor hours as the cost driver for variable overhead. Which of the following items does not need to be known, in order to calculate the variable overhead spending variance?

• A) Actual overhead costs
• B) Actual direct labor hours
• C) Standard variable overhead rate per direct labor hour
• D) Standard direct labor hours allowed

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Definitions:

LIFO

Last In, First Out, an inventory valuation method where the most recently produced or acquired items are the first to be expensed.

Variable Costing

A costing method that includes only variable manufacturing costs—direct materials, direct labor, and variable manufacturing overhead—in the cost of a product.

Absorption Costing

A method of costing that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed overheads - in the cost of a product.

Net Operating Income

This is the total profit of a business after operating expenses are subtracted from gross revenue but before taxes and interest expenses are deducted.