The Fast & Furious Company Produces Two Products: Toy Planes

question 7

Multiple Choice

The Fast & Furious Company produces two products: toy planes and toy race cars. They use departmental overhead rates for the two production departments: molding and finishing. Molding uses machine hours to assign overhead and Finishing uses direct labor hours. 50,000 planes and 250,000 race cars are produced. Please find the following data: $$\begin{array} { | l | c | c | c | } \hline & \text { Molding } & \text { Finishing } & \text { T otal } \\\hline \text { Estimated Overhead } & \$ 250,000 & \$ 100,000 & \$ 350,000 \\\hline \text { Actual Overhead } & \$ 240,000 & \$ 120,000 & \$ 360,000 \\\hline & & & \\\hline \text { Expected Direct Labor Hours } & & & \\\hline \text { planes } & 5,000 & 5,000 & 10,000 \\\hline \text { race cars } & 5,000 & 35,000 & 40,000 \\\hline \text { Expected Machine Hours } & & & \\\hline \text { planes } & 17,000 & 3,000 & 20,000 \\\hline \text { race cars } & 3,000 & 7,000 & 10,000 \\\hline \text { Actual Direct Labor Hours } & & & \\\hline \text { planes } & 4,500 & 5,300 & 10,000 \\\hline \text { race cars } & 5,500 & 34,500 & 40,000 \\\hline \text { Actual Machine Hours } & & & \\\hline \text { planes } & 16,500 & 3,500 & 20,000 \\\hline \text { race cars } & 3,200 & 6,800 & 10,000 \\\hline\end{array}$$ What are the departmental overhead rates for the molding and finishing department respectively?

• A)$25; $2.50
• B)$8.33; $2
• C)$25; $10
• D)$12.50; $2.50

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Definitions:

Robinson-Patman Act

is a United States federal law that prohibits anticompetitive practices by producers, specifically price discrimination.

Consumer Surplus

The difference between the total amount that consumers are willing and able to pay for a good or service and the total amount they actually do pay.

Producer Surplus

The disparity between what sellers are prepared to accept for a product or service and the amount they actually get.

Antitrust Laws

Legislation enacted by the government to prevent monopolies and to foster competition in the marketplace.