Symphonix Corporation Is Preparing Its Annual Budget Under a Traditional Costing System That Assigns Overhead on the Its

question 122

Multiple Choice

Symphonix Corporation is preparing its annual budget. As part of its analysis of the contribution of individual products to overall profitability, the controller estimates the amount of overhead that should be assigned to the individual product lines. Budgeted inspection costs are $12,000. Additional information is as follows: $$\begin{array} { l c c } & \text { Small Pumps } & \text { Large Pumps } \\ \text { Units inspected } & 120 & 120 \\\text { Hours spent inspecting } & 2.5 & 17.5 \\\text { Direct labor hours per unit } & 2 & 2\end{array}$$ Under a traditional costing system that assigns overhead on the basis of units inspected, the inspection costs allocated to one small pump would be:

• A) $875
• B) $50
• C) $2.50
• D) $300

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Definitions:

Substitute Product

A good or service that can be used in place of another to satisfy similar needs or desires.

Complements

Products or services that are used together, where the consumption or use of one increases the demand for the other.

Substitutes

Goods or services that can be used in place of each other, satisfying the same needs or desires.

Complements

Products or services that are often used together, such that demand for one increases the demand for the other.