Sherman,Inc

question 55

Multiple Choice

Sherman,Inc.manufactures chainsaws that sell for $58.Each chainsaw uses $10 in direct materials and $3 in direct labor per unit.Sherman has two activities: Machining,which is applied at the rate of $2 per machine hour,and Finishing,which is applied at the rate of $20 per batch.This month,Sherman made 200 chainsaws,using 1,000 machine hours in 40 batches.What is the total manufacturing cost for one chainsaw?

• A)$13
• B)$14
• C)$27
• D)$30

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Definitions:

Operating Leverage

The degree to which a firm can increase operating income by increasing revenue, indicating the proportion of fixed versus variable costs.

Depreciation Expense

The methodical distribution of a physical asset's cost throughout its lifespan, accounting for depreciation or becoming outdated.

Operating Cash Flow

The cash generated from the normal operating activities of a business, reflecting its ability to generate sufficient cash to fund its operations.

Variable Cost

Expenditures that fluctuate based on the volume of goods or services provided by a business.