Fatzinger Corporation Has Two Production Departments, Milling and Assembly

question 265

Multiple Choice

Fatzinger Corporation has two production departments, Milling and Assembly. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Milling Department's predetermined overhead rate is based on machine-hours and the Assembly Department's predetermined overhead rate is based on direct labor-hours. At the beginning of the current year, the company had made the following estimates: The predetermined overhead rate for the Assembly Department is closest to:

• A) $8.20 per direct labor-hour
• B) $3.40 per direct labor-hour
• C) $4.06 per direct labor-hour
• D) $11.60 per direct labor-hour

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Definitions:

Basis Points

A financial measurement unit representing the percentage shift in the value or rate of a financial asset, which is equal to one hundredth of a percent.

Yield To Maturity

The total return anticipated on a bond if the bond is held until its maturity date, expressed as an annual rate.

Duration

A measure of the sensitivity of a bond's or fixed income portfolio's price to changes in interest rates, often used to manage interest rate risk.

Modified Duration

A measure of the sensitivity of a bond's price to changes in interest rates, specifically reflecting how much the duration changes for a 1% change in yield.