A Company Incurs $3,600,000 of Overhead Each Year in Three

question 81

Multiple Choice

A company incurs $3,600,000 of overhead each year in three departments: Processing, Packaging, and Testing. The company performs 800 processing transactions, 200,000 packaging transactions, and 2,000 tests per year in producing 400,000 drums of Oil and 600,000 drums of Sludge. The following data are available: $\begin{array}{crr}\text { Department}&\text {Expected use of Driver }&\text {Cost }\\\hline \text { Processing } & 800 & \$ 1,500,000 \\\text { Packaging } & 200,000 & 1,500,000 \\\text { Testing } & 2,000 & 600,000\end{array}$

$\text { Production information for the two products is as follows: }$
$\begin{array}{lcc}&\text { Oil }&\text { Sludge }\\\text { Department }&\text { Expected Use of Driver }&\text { Expected Use of Driver }\\\text { Processing } & 300 & 500 \\\text { Packaging } & 120,000 & 80,000 \\\text { Testing } & 1,600 & 400\end{array}$ The amount of overhead assigned to Oil using ABC is

• A)$1,800,000.
• B)$1,942,500.
• C)$1,657,500.
• D)$1,380,000.

---

Definitions:

Tax Cuts

Reductions in the amount of taxes that individuals or corporations are required to pay to the government.

Tax Revenue

The monetary gains that are acquired by governments from taxation.

Arthur Laffer

Arthur Laffer is an economist known for the Laffer Curve, which posits that there is an optimal tax rate that maximizes revenue without discouraging economic activity.

Tax Revenues

The proceeds that governments secure by enacting taxes.