Ralston has the following budgeted costs at its anticipated production level (expressed in hours): variable overhead, $165,000; fixed overhead, $250,000. If Ralston now revises its anticipated production slightly upward, it would expect:
A) total fixed overhead of $250,000 and a lower hourly rate for variable overhead.
B) total fixed overhead of $250,000 and the same hourly rate for variable overhead.
C) total fixed overhead of $250,000 and a higher hourly rate for variable overhead.
D) total variable overhead of less than $165,000 and a lower hourly rate for variable overhead.
E) total variable overhead of less than $165,000 and a higher hourly rate for variable overhead.

Question

Quizplus · Accepted Answer

Fixed overhead is not affected by changes in production level, so it will remain at $250,000. Variable overhead is directly proportional to production level, so it will increase as production increases. Therefore, the hourly rate for variable overhead will remain the same.

Ralston Has the Following Budgeted Costs at Its Anticipated Production