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 $9,870 and that the associated rate variance was $300 unfavorable. If 5,500 machine-hours were actually worked during July, the standard maintenance cost per machine-hour was:
A) $1.79 per machine-hour
B) $1.85 per machine-hour
C) $1.74 per machine-hour
D) $1.90 per machine-hour

Question

Quizplus · Accepted Answer

The actual maintenance cost was $9,870, and the rate variance was $300 unfavorable, meaning the actual cost was $300 more than the standard cost. Therefore, the standard cost was $9,870 - $300 = $9,570. Dividing this by the 5,500 machine-hours gives a standard cost of $1.74 per machine-hour.

At Eady Corporation, Maintenance Is a Variable Overhead Cost That