Figure 24-5 Big Bus Company Produces Buses. in Order to Produce the Produce

question 32

Multiple Choice

Figure 24-5
Big Bus Company produces buses. In order to produce the seats for the buses, special equipment must be set up. The setup cost per frame is £40. The cost of carrying seats in inventory is £5 per seat per year. The company produces 100,000 buses per year.
-Refer to Figure 24-5. Total setup costs associated with the economic order quantity are

• A)£3,953.
• B)£3,612.
• C)£3,162.
• D)£1,778.

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Definitions:

Standard Labor-Hours

A measurement used in accounting to represent the number of labor hours expected to produce one unit of output.

Manufacturing Overhead Applied

The allocation of manufacturing overhead to specific jobs or product units based upon the predetermined overhead rate.

Standard Machine-Hours

The estimated amount of machine time required to produce a single unit of production under normal operating conditions.

Fixed Manufacturing Overhead

Costs in the manufacturing process that do not vary with the volume of production, such as salaries of managers and depreciation of factory equipment.