The denominator of the fixed manufacturing cost rate is __________?
Correct answer: D. capacity utilization
- A. adjusted labor utilization
- B. unadjusted labor utilization
- C. material utilization
- D. capacity utilization
Explanation
The fixed manufacturing cost rate is calculated by dividing budgeted fixed manufacturing costs by a capacity-based denominator. Therefore, capacity utilization provides the relevant denominator among the choices.
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About Cost Accounting
Cost accounting measures and analyses the cost of producing goods or providing services for planning, control and pricing decisions. It covers direct and indirect costs, fixed and variable costs, job and process costing, break-even analysis, marginal costing, overhead allocation, and the difference between product cost and period cost.
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