A Company Incurs $1,200,000 of Overhead Each Year in Three

question 23

Multiple Choice

A company incurs $1,200,000 of overhead each year in three departments, Processing, Packaging, and Testing.The company performs 800 processing transactions, 200,000 packaging transactions, and 2,000 tests per year in producing 400,000 drums of oil and 600,000 drums of sludge.The following data are available: $$\begin{array} { l c c } \text { Department } & \text { Estimated use of Driver } & \text { Cost } \\\hline \text { Processing } & 800 & \$ 500,000 \\\text { Packaging } & 200,000 & 500,000 \\\text { Testing } & 2,000 & 200,000\end{array}$$ Production information for sludge is as follows:
$$\begin{array} { l c } \text { Department } & \text { Estimated use of Driver } \\\hline \text { Processing } & 500 \\\text { Packaging } & 80,000 \\\text { Testing } & 400\end{array}$$ Calculate the amount of overhead assigned to sludge.

• A)$600,000
• B)$552,500
• C)$647,500
• D)$460,000

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Definitions:

Imperfect Competition

All market structures except pure competition; includes monopoly, monopolistic competition, and oligopoly.

Labor Demand Elasticity

The sensitivity of employers' demand for labor to changes in the price or cost of labor, reflecting how much the quantity of labor demanded responds to changes in wages.

Total Costs

The cumulative costs associated with the complete process of producing and selling a product or service.

Labor Cost

The total expenditure incurred by employers for the wages, benefits, and taxes of their workforce.