The Brookstone Company Produces 9 Volt Batteries and AAA Batteries

question 155

Multiple Choice

The Brookstone Company produces 9 volt batteries and AAA batteries. The Brookstone Company uses a plantwide rate to apply overhead based on direct labor hours. The following data is given: $$\begin{array} { | l | l | } \hline \text { Actual Overhead } & \$ 325,000 \\\hline \text { Estimated Overhead } & \$ 350,000 \\\hline \text { Estimated Activity: } & \\\hline 9 \text { volt battery } & 100,000 \text { direct labor hours } \\\hline \text { AAA battery } & 400,000 \text { direct labor hours } \\\hline \text { Actual Activity: } & \\\hline 9 \text { volt battery } & 125,000 \text { direct labor hours } \\\hline \text { AAA battery } & 400,000 \text { direct labor hours } \\\hline \text { Units Produced: } & \\\hline 9 \text { volt battery } & 500,000 \\\hline \text { AsA battery } & 250,000 \\\hline\end{array}$$
How much was overhead over/underapplied?

• A)$25,000
• B)$17,500
• C)$42,500
• D)none of these

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Definitions:

Disbursement Float

The time delay between when a check is written and the funds are actually deducted from the payer's account.

Collections Float

The time gap between when a check is deposited in a bank and when the funds become available, affecting the cash flow of the business.

Credit Department

The division within a company or financial institution that is responsible for managing customer credit and collecting payments.

DSO

Days Sales Outstanding (DSO) is a measure of the average number of days that it takes a company to collect payment after a sale has been made.