Hale Company Manufactures Two Models of Its Couch, the Mini

question 125

Multiple Choice

Hale Company manufactures two models of its couch, the Mini and the Maxi. The Mini model requires 10,000 direct labor hours and the Maxi model requires 40,000 direct labor hours. The company produces 4,000 units of the Mini model and 1,000 units of the Maxi model each year. The company produces the Mini model in batch sizes of 200, while it produces the Maxi model in batch sizes of 100. The company expects to incur $360,000 of total setup costs this year. How much of the setup costs are allocated to the Mini model using ABC costing?

• A) $240,000
• B) $180,000
• C) $72,000
• D) $300,000

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Definitions:

HDC Status

Holder in Due Course Status; a term in negotiable instruments law referring to a person who has acquired a negotiable instrument in good faith for value, and thus has certain protections.

Negotiable Instrument

A written promise or order to pay a specific amount of money, easily transferable from one party to another.

Face Value

The nominal or original value stated on a financial instrument, such as a bond or currency bill, not necessarily its current market value.

Possession

The state of having, owning, or controlling something, either tangibly or legally.