Kayak Company Uses a Job Order Costing System and Allocates

question 48

Multiple Choice

Kayak Company uses a job order costing system and allocates its overhead on the basis of direct labor costs.Kayak Company's production costs for the year were: direct labor,$30,000;direct materials,$50,000;and factory overhead applied $6,000.The overhead application rate was:

• A)5.0%.
• B)12.0%.
• C)20.0%.
• D)500.0%.
• E)16.7%.

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Definitions:

Total Period Cost

The sum total of all expenses incurred by a business within a specific period, not directly tied to the production process.

Variable Costing

An accounting method that includes only variable production costs—direct materials, direct labor, and variable manufacturing overhead—in the cost of a unit of product.

Unit Product Cost

The total cost associated with producing a single unit of product, including direct materials, direct labor, and allocated overhead.

Absorption Costing

An accounting practice that aggregates all costs related to making a product, including the expenses for direct materials, the wages for direct labor, and every overhead cost, fixed or changing, into the product’s pricing.