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Managerial Accounting

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Normal Job Order Costing: Understanding Overhead for a Service

MGRACT-O5HJFR

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.

A

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

B

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

C

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

D

Rising Dawn's overhead is perfectly fixed per month.