Which of the Following Firms Is Most Likely to Use

question 100

Multiple Choice

Which of the following firms is most likely to use cost-plus pricing?

• A)A firm that makes one product.
• B)A firm that sells one product and has a sizable research and development budget.
• C)A firm that makes several products and has a sizable research and development budget, the cost of which cannot be easily assigned to each product.
• D)A firm that makes many products but has a small research and development budget, the cost of which can be easily assigned to the different product lines.

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Definitions:

Work in Process

Inventory items that are in the process of being produced but are not yet completed.

Underapplied Overhead

The situation where the allocated manufacturing overhead costs are less than the actual overhead costs incurred, leading to undercosted products.

Predetermined Overhead Rate

A calculation used in cost accounting to allocate overhead costs to products or job orders based on a set formula before the period begins.

Direct Labour-hours

The total number of labor hours spent directly on the production of goods or services.