Canterra Co

question 11

Multiple Choice

Canterra Co.incurs $160,000 of overhead costs each year in its three main departments, setup ($10,000) , machining ($110,000) , and packing ($40,000) .The setup department performs 40 setups per year, the machining department works 5,000 hours per year, and the packing department packs 500 orders per year.Information about Canterra's 2 products is as follows: Using ABC, how much overhead is assigned to Product Two each year?

• A)$80,000
• B)$64,000
• C)$121,000
• D)$128,000

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Definitions:

Opportunity Cost

The relinquishment of possible advantages from alternate options upon making a choice.

Producer Surplus

The difference between what producers are willing to accept for a good or service versus what they actually receive, measured by the area above the supply curve and below the price level.

Demand

The desire to purchase goods and services backed by the ability and willingness to pay a certain price.

Consumer Surplus

The gap between the total price consumers are ready and able to spend on a good or service and what they actually spend.