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

Question

Quizplus · Accepted Answer

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.

At Eady Corporation, Maintenance Is a Variable Overhead Cost That