Question

1) Which of the following mathematical expression is used to calculate *budgeted variable overhead cost rate per output unit*?

A) Budgeted output allowed per input unit × Budgeted variable overhead cost rate per input unit
B) Budgeted input allowed per output unit ÷ Budgeted variable overhead cost rate per input unit
C) Budgeted output allowed per input unit ÷ Budgeted variable overhead cost rate per input unit
D) Budgeted input allowed per output unit × Budgeted variable overhead cost rate per input unit

Answer 1

The expression used for calculating budgeted variable overhead cost rate per output unit is budgeted input allowed per output unit × budgeted variable overhead cost rate per input unit.

Step-by-step explanation:

To calculate the budgeted variable overhead cost rate per output unit, the correct mathematical expression is:

D) Budgeted input allowed per output unit × Budgeted variable overhead cost rate per input unit

This formula is used to estimate the variable overhead costs on a per-unit basis. It involves multiplying the budgeted amount of input that is needed to produce one unit of output by the cost rate per unit of input. This calculation is pivotal in managerial accounting for setting price levels, forecasting expenses, and budgeting for future production activities.

The concept of average variable cost, which is obtained by dividing variable cost by quantity of output, is also essential in understanding costs from a business perspective. Similarly, spreading the overhead refers to allocating fixed costs over the units produced, reducing average fixed cost as production increases.