Doyle Company uses machine hours to allocate variable manufacturing overhead to its product. The expected production for the coming period is 500 batches using 500 machine hours. The existing machine uses 12 KWH per machine hour at a cost of $8 per KWH. The company is considering purchasing a new machine that will use only 9 KWH per machine hour. Using the variable overhead spending and efficiency variances, how much would the company be willing to pay for this new machine?
A) $ 180
B) $10,000
C) $11,000
D) $12,000

Question

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The Answer of Doyle Company uses machine hours to allocate variable manufacturing overhead to its product. The expected production for the coming period is 500 batches using 500 machine hours. The existing machine uses 12 KWH per machine hour at a cost of $8 per KWH. The company is considering purchasing a new machine that will use only 9 KWH per machine hour. Using the variable overhead spending and efficiency variances, how much would the company be willing to pay for this new machine?
A) $ 180
B) $10,000
C) $11,000
D) $12,000

Doyle Company Uses Machine Hours to Allocate Variable Manufacturing Overhead