Tidwell Industries Has the Following Overhead Costs and Cost Drivers

question 76

Multiple Choice

Tidwell Industries has the following overhead costs and cost drivers. Direct labor hours are estimated at 100,000 for the year. If overhead is applied using traditional costing based on direct labor hours, the overhead application rate is

• A) $9.60.
• B) $12.00.
• C) $15.00.
• D) $34.17.

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Definitions:

Credit Sales

Sales transactions where the payment is deferred to a future date, typically resulting in the creation of accounts receivable.

Allowance for Doubtful Accounts

An allowance for doubtful accounts is a contra-account that reduces the total receivables on the balance sheet by the amount that is estimated to be uncollectible.

Bad Debt Expense

The cost associated with accounts receivable that a company does not expect to collect because customers default on their payments.

Allowance Method

An accounting technique used to estimate and account for potential uncollectible accounts receivable and bad debts.