Question

Sussex Company 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.

Answer 1

The standard variable overhead rate for Sussex Company for May is calculated by dividing the budgeted variable overhead ($48,000) by the anticipated machine hours (24,000), resulting in a rate of Option A. $2.00 per machine hour.

Step-by-step explanation:

The student has asked to calculate the standard variable overhead rate for May for Sussex Company. The standard variable overhead rate is found by dividing the budgeted variable overhead by the anticipated machine hours of activity. Using the given data, the budgeted variable overhead is $48,000 and the anticipated machine hours are 24,000. Thus, the standard variable overhead rate is calculated as follows:

Standard Variable Overhead Rate = Budgeted Variable Overhead / Anticipated Machine Hours

Standard Variable Overhead Rate = $48,000 / 24,000 machine hours

Standard Variable Overhead Rate = $2.00 per machine hour.

Hence, the correct answer is A. $2.00.