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

question 78

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 Oil is

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

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