Theory Enterprises uses a standard cost system and prepared the following budget for May when 24,000 machine hours of activity were anticipated: variable overhead, $48,000; ﬁxed overhead: $240,000.Actual data for May were: Standard machine hours allowed for output attained: 25,000 Actual machine hours worked: 24,000 Variable overhead incurred: $50,000 Fixed overhead incurred: $250,000 The standard variable overhead rate for May is:
A)$2.00.
B)$2.08.
C)$3.00.
D)$5.00.
E)$5.21.

Question

Quizplus · Accepted Answer

The standard variable overhead rate is calculated by dividing the budgeted variable overhead by the budgeted machine hours. Thus, $48,000 / 24,000 hours = $2.00 per machine hour.

Theory Enterprises Uses a Standard Cost System and Prepared the Following