Ralston has the following budgeted costs at its anticipated production level (ex

Question

Ralston has the following budgeted costs at its anticipated production level (expressed in hours): variable overhead, $165,000; fixed overhead, $250,000. If Ralston now revises its anticipated production slightly upward, it would expect:

A total fixed overhead of $250,000 and a lower hourly rate for variable overhead.

B total fixed overhead of $250,000 and the same hourly rate for variable overhead.

C total fixed overhead of $250,000 and a higher hourly rate for variable overhead.

D total variable overhead of less than $165,000 and a lower hourly rate for variable overhead.

E total variable overhead of less than $165,000 and a higher hourly rate for variable overhead.

Explanation / Answer

Solution:

If Ralston now revises its anticipated production slightly upward, it would expect "total fixed overhead of $250,000 and the same hourly rate for variable overhead" as total fixed overhead always remain constant up to full capacity and variable hourly rate will also remain the same and total variable overhead cost chages according to change in volume.

Gence option B is correct.

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