Lewis Company Manufactures Two Models of Pens, a Standard and a Deluxe

question 16

Multiple Choice

Lewis Company manufactures two models of pens, a standard and a deluxe model.Three activities have been identified as cost drivers and the related overhead costs pooled together to arrive at the following information: $\begin{array}{cccc} & \begin{array}{c}\text { Number } \\\text { of }\end{array} & \begin{array}{c}\text { Number } \\\text { of }\end{array} & \begin{array}{c}\text { Number } \\\text { of }\end{array} \\\text { Product } & \text { Setups } & \text { Components } & \text { DLH }\\\hline\text { Standard } & 20 & 15 & 375 \\\text { Deluxe } & 30 & 45 & 225 \\& & & \\\text { Costs per pool } & \$ 25,000 & \$ 36,000 & \$ 15,000\end{array}$ If a traditional costing system is used, _____ is the overall overhead rate using direct-labor hours.

• A)$500
• B)$150
• C)$60
• D)$127

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Definitions:

Interest Payment

The amount paid by a borrower to a lender as compensation for the use of borrowed money, usually expressed as a percentage of the principal amount.

Premium on Bonds Payable

The amount by which the bond's selling price exceeds its face value, representing an additional cost to the issuer.

Par Value

The face value of a bond or stock as stated in the corporate charter, not necessarily related to its market value.

Installment Note Payable

A debt or obligation that is paid back in regular installments over a specified period, including both principal and interest payments.