Pluton Makes Particular Plastics for Sale to the Public

question 9

Multiple Choice

Pluton makes particular plastics for sale to the public and the government.Basic cost data for a 100-pound drum of one particular product called Xentra appears below: $\begin{array}{c}\begin{array}{lll}\\ \text {Chemical Xeta, gals}\\ \text {Chemical Thenta, gals }\\ \text {Base material, pound }\\ \text {100-1b lined drum} \end{array}\begin{array}{lll} \text {Qty}\\15\\35\\20\\1 \end{array}\begin{array}{rr} & \text { Cost } \\\$ & 25.00 \\\$ & 27.50 \\\$ & 1.00 \\\$&51.83\end{array}\end{array}$

Variable factory overhead is estimated to be $1,200,000 per month,when 1,000,000 pounds of various products are produced.The plant employs 20 chemical workers who typically work 175 hours each per month and are paid $24 per hour.Other workers are classified as indirect and are included in fixed overhead.The highly automated plant typically runs 21,000 machine hours per month.The preparation of one 100-pound batch of Xentra needs ten minutes of direct labor and 75 minutes of machine time.Fixed manufacturing overhead totals $3,500,000 per month.Forty percent of the fixed manufacturing overhead is labor-related costs and the balance is machine-related costs.
A government agency wants to purchase 200 drums of Xentra at cost plus a flat fee.Which allocation method gives the profit-maximizing result?

• A)Allocating overhead per 100-pound drum
• B)Allocating overhead per machine hour
• C)Allocating overhead per direct labor hour
• D)Allocating overhead per pound
• E)None of the choices are correct

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Definitions:

Federal Trade Commission

An independent agency of the United States government, established in 1914, whose principal mission is the promotion of consumer protection and the elimination and prevention of anticompetitive business practices.

False And Deceptive Advertising

Marketing practices that mislead or lie to consumers about the benefits, qualities, or ingredients of a product or service.

Rite Aid

An American drugstore chain that provides a variety of health and wellness solutions, including filling prescriptions, health products, and other retail items.

Staples

Basic or essential food products or materials that are widely used and in regular demand.