Use the Following Data for the Next 2 Questions

question 101

Multiple Choice

Use the following data for the next 2 questions:
A manufacturer operating with excess capacity has been asked to fill a special order at $7.25 per unit. The regular price is $10 per unit. No other use of the currently idle capacity can be found. The manufacturer's usual variable costs per unit are $3.50 for direct materials, $2.00 for direct labor, $1.00 for variable overhead, and $0.50 for sales commission. No sales commission would be paid on this special order. The average fixed overhead cost per unit is $0.25.
-Under the general decision rule, the minimum price per unit for this special order is

• A) $7.25
• B) $6.50
• C) $7.00
• D) $7.50

Recognize the need for accurate cost allocation methods to ensure reliable product and service costing.

Understand the significance of inventory accounts in a manufacturing business and their impact on financial reporting.

Learn how job order costing aids in performance evaluation and decision-making through trend analysis and cost control.

Understand how to calculate and interpret overapplied or underapplied overhead.

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Definitions:

Bank Loan

A sum of money lent by a bank to a borrower at an agreed interest rate.

Closing Entries

Journal entries made at the end of an accounting period to transfer the balances in temporary accounts to permanent accounts and prepare the company's books for the next period.

Statement of Income

A report detailing the earnings, expenses, and net profit of a business over a fiscal period, illustrating the financial performance.

Zero Balance

A situation where an account's balance is exactly zero, indicating no funds or no outstanding amount.