Markham Corporation Uses a Job-Order Costing System Markham Applies Overhead Using a Predetermined Rate Based on Direct

question 68

Multiple Choice

Markham Corporation uses a job-order costing system. The following data are for last year:
$\begin{array}{lrl}\text { Estimated direct labor-hours } & 12,000 \\\text { Estimated manufacturing overhead costs } & \$ 39,000 \\\text { Actual direct labor-hours } & 11,000 \\\text { Actual manufacturing overhead costs } & \$ 37,000\end{array}$

Markham applies overhead using a predetermined rate based on direct labor-hours. What predetermined overhead rate was used last year?

• A) $3.55 per direct labor-hour.
• B) $3.25 per direct labor-hour.
• C) $3.08 per direct labor-hour.
• D) $3.36 per direct labor-hour.

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Definitions:

Autonomous Consumption

Describes the expenditure that consumers will make even when they have no income, considering it as a basic level of consumption driven by needs.

Saving

The act of setting aside money for future use, reducing current consumption.

Induced Consumption

Consumer spending that increases or decreases as a result of changes in income, as opposed to autonomous consumption that does not change with income.

Disposable Income

Income available to a household or individual after taxes have been paid, available for spending or saving.