The Watts Company Uses Predetermined Overhead Rates to Apply Manufacturing

question 17

Multiple Choice

The Watts Company uses predetermined overhead rates to apply manufacturing overhea? to jobs. The predetermined overhead rate is based on labour cost in Dept. A and on machine hours in Dept. B. At the beginning of the year, the company made the following estimates: $$\begin{array} { | l | l | l | } \hline & \text { Dept } A & \text { Dept } B \\\hline \text { Direct labour cost } & \$ 30,000 & \$ 40,000 \\\hline \text { Manufacturing overhead } & 60,000 & 50,000 \\\hline \text { Direct labour hours } & 6,000 & 8,000 \\\hline \text { Machine hours } & 2,000 & 10,000 \\\hline\end{array}$$ What predetermined overhead rates would be used in Dept A and Dept B, respectively?

• A)110% and $15.00.
• B)50% and $8.00.
• C)50% and $5.00.
• D)200% and $5.00.

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Definitions:

Unit Change

A term describing the effect of a one-unit increase in the independent variable on the dependent variable in the context of statistical models, particularly regression analysis.

Regression Assumptions

Conditions that must be met for the regression analysis results to be valid, including linearity, independence, homoscedasticity, and normality of residuals.

F Distribution

A probability distribution that arises in the testing of whether two population variances are equal and in the analysis of variance (ANOVA) for comparing means among more than two groups.

Coefficient of Multiple Determination

A statistic that quantifies the proportion of variance in the dependent variable that is predictable from the independent variables, commonly used in multiple regression analysis.