Compton Company Uses a Predetermined Overhead Rate in Applying Overhead

question 100

Multiple Choice

Compton Company uses a predetermined overhead rate in applying overhead to production orders on a labour cost basis in Department A and on a machine hours basis in Department B. At the beginning of the most recently completed year, the company made the following estimates: $$\begin{array} { | l | l | l | } \hline & \text { Dept. A } & \text { Dept. B } \\\hline \text { Direct labour cost } & \$ 56,000 & \$ 33,000 \\\hline \text { Factory overhead } & \$ 67,200 & \$ 45,000 \\\hline \text { Direct labour hours } & 8,000 & 9,000 \\\hline \text { Machine hours } & 4,000 & 15,000 \\\hline\end{array}$$ What predetermined overhead rate would be used in Department A and Department B, respectively?

• A)83% and $3.
• B)120% and $3.
• C)81% and $3.
• D)83% and $5.

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Definitions:

Anticompetitive Effects

Negative impacts on competition within a market, often resulting from monopolistic practices or mergers.

Sherman Act

An 1890 U.S. federal statue that outlaws monopolistic business practices and promotes competition.

Criminal Violation

An act or omission that goes against the laws set forth in criminal codes, leading to prosecution by governmental authorities.

Tying Arrangements

A situation in sales where the seller requires the buyer to purchase an additional, often unrelated, product or service as a condition of buying the desired product or service.