Managerial Accounting

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Normal Job Order Costing: Understanding Overhead for a Service


Rising Dawn Medicine is a private ambulance service that provides emergency and transport services in the local county. Rising Dawn's actual and estimated costs for a heart attack patient being transported to another hospital are as follows:

Actual materials: \$1350
Actual labor: \$100 an hour for 8 hours
Estimated overhead: \$50,000 a month
Predetermined overhead rate: \$600 per labor hour
Standard profit margin: 10% of cost

Which of the following statements is/are true regarding Rising Dawn's overhead? Select ALL that apply.


Rising Dawn's predetermined overhead rate is an estimation based on the expectations of management regarding demand.


Rising Dawn's predetermined overhead rate is probably calculated based upon past performance of the ambulance service.


Rising Dawn's actual overhead will vary from month to month based on demand for its services.


Rising Dawn's overhead is perfectly fixed per month.