Jessup Corp.'s Management only tracks the total amount of Utilities Expense incurred. However, the accounting manager wants to know whether the rate that the company is being charged for its utilities has gone up. Utilities are Jessup Corp.'s only variable overhead expense. Variable overhead is applied at a rate of $0.50/machine hour (calculated based on last year's utility bills and machine usage). Actual machine hours this period were 60,000, while the standard machine hours (given the current level of production) were 70,000. Actual utility payments were $34,000.
Has the company's utility rate increased?
What should Jessup Corp. have expected utility bills to be, given actual machine hours?

Question

Jessup Corp.'s Management only tracks the total amount of Utilities Expense incurred. However, the accounting manager wants to know whether the rate that the company is being charged for its utilities has gone up. Utilities are Jessup Corp.'s only variable overhead expense. Variable overhead is applied at a rate of $0.50/machine hour (calculated based on last year's utility bills and machine usage). Actual machine hours this period were 60,000, while the standard machine hours (given the current level of production) were 70,000. Actual utility payments were $34,000. 
Has the company's utility rate increased?
What should Jessup Corp. have expected utility bills to be, given actual machine hours?

Quizplus · Accepted Answer

The Answer of Jessup Corp.'s Management only tracks the total amount of Utilities Expense incurred. However, the accounting manager wants to know whether the rate that the company is being charged for its utilities has gone up. Utilities are Jessup Corp.'s only variable overhead expense. Variable overhead is applied at a rate of $0.50/machine hour (calculated based on last year's utility bills and machine usage). Actual machine hours this period were 60,000, while the standard machine hours (given the current level of production) were 70,000. Actual utility payments were $34,000. 
Has the company's utility rate increased?
What should Jessup Corp. have expected utility bills to be, given actual machine hours?