A Company Incurs $2,400,000 of Overhead Each Year in Three

question 70

Multiple Choice

A company incurs $2,400,000 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: $\begin{array}{lcr}\text { Department }&\text {Expected Use of Driver }&\text {Cost }\\\text { Processing } & 800 & \$ 1,000,000 \\\text { Packaging } & 200,000 & 1,000,000 \\\text { Testing } & 2,000 & 400,000\end{array}$

$\text { Production information for the two products is as follows: }$

$\begin{array}{lcc}&\text { Oil }&\text { Sludae }\\\text { Department}&\text { Expected Use of Driver}&\text { Expected Use of Driver }\\\text { Processing } & 300 & 500 \\\text { Packaging } & 120,000 & 80,000 \\\text { Testing } & 1,600 & 400\end{array}$
-The amount of overhead assigned to Sludge is

• A)$1,200,000.
• B)$1,105,000.
• C)$1,295,000.
• D)$ 920,000.

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Definitions:

Interest Rate

The percentage of a sum of money charged for its use, typically expressed as an annual rate, influencing savings and borrowing costs.

Saving

Current income that is not spent on consumption goods. Saving makes it possible for resources to be devoted to investments (like the making of tractors or other equipment used in production).

Investment

The purchase, construction, or development of resources, including physical assets, such as plants and machinery, and human assets, such as better education. Investment expands an economy’s resources. The process of investment is sometimes called capital formation.

Barter Economy

An economic system where goods and services are exchanged directly for other goods and services without the use of money.