Assume Processing Costs Are Allocated on the Basis of Number

question 125

Multiple Choice

Assume processing costs are allocated on the basis of number of machine setups. How much processing cost will be allocated to each product line?

• A) $5,000 to each product line
• B) $7,500 each to orange juice concentrate and orange popsicles, and $15,000 to orange juice
• C) $10,000 to each product line
• D) None of the above

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Definitions:

Implicit Costs

Costs that represent the opportunity costs of using resources that the firm already owns, not involving direct monetary payment.

Explicit Costs

Direct, out-of-pocket expenses incurred in conducting an activity or business operation.

Economic Profit

The difference between total revenues and total costs, including both explicit and implicit costs, indicating the financial gain in an economic activity.

Accountant

A professional who is responsible for keeping and interpreting financial records, ensuring accuracy and compliance with laws.