Asked by Clayton Jarvis on Apr 29, 2024
Verified
At Eady Corporation, maintenance is a variable overhead cost that is based on machine-hours. The performance report for July showed that actual maintenance costs totaled $8,650 and that the associated rate variance was $250 unfavorable. If 5,000 machine-hours were actually worked during July, the standard maintenance cost per machine-hour was:
A) $1.73 per machine-hour
B) $1.78 per machine-hour
C) $1.68 per machine-hour
D) $1.83 per machine-hour
Standard Maintenance Cost
The anticipated cost of regular upkeep and maintenance of equipment or property, based on historical data or industry standards.
Machine-Hours
A measure of the amount of time machines are used in the production process, often used as an allocation base for assigning overhead costs.
- Execute calculations and assessments on variable overhead deviations, highlighting rate and efficiency differences.
Verified Answer
KS
Khooshal SeechurnApr 30, 2024
Final Answer :
C
Explanation :
The standard maintenance cost per machine-hour can be calculated by first adjusting the actual costs for the variance to find the standard cost, then dividing by the actual machine-hours worked. The actual costs were $8,650 with a $250 unfavorable variance, meaning the standard costs were $8,650 - $250 = $8,400. Dividing this by the 5,000 machine-hours gives a standard cost of $1.68 per machine-hour.
Learning Objectives
- Execute calculations and assessments on variable overhead deviations, highlighting rate and efficiency differences.
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