At Overland Company, Maintenance Cost Is Exclusively a Variable Cost

question 121

Multiple Choice

At Overland Company, maintenance cost is exclusively a variable cost that varies directly with machine-hours. The performance report for July showed that actual maintenance costs totaled $9,800 and that the associated rate variance was $200 unfavorable. If 8,000 machine-hours were actually worked during July, the budgeted maintenance cost per machine-hour was:

• A) $1.20
• B) $1.25
• C) $1.275
• D) $1.225

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Definitions:

Total Manufacturing Costs

The aggregate cost incurred in the production of goods, including raw materials, labor, and overhead expenses.

Direct Labor

The cost of labor that is directly involved in the production of goods or services.

Manufacturing Overhead

Refers to the indirect factory-related costs incurred when manufacturing a product or performing a service, which may include the cost of utilities, depreciation, and salaries of maintenance personnel.

Total Manufacturing Costs

The sum of all costs directly involved in the production of a good, including direct materials, direct labor, and manufacturing overhead.