Kaumajet Factory Produces Two Products: Table Lamps and Desk Lamps

question 9

Multiple Choice

Kaumajet Factory produces two products: table lamps and desk lamps. It has two separate departments: Fabrication and Assembly. The factory overhead budget for the Fabrication Department is $550,000, using 500,000 direct labor hours. The factory overhead budget for the Assembly Department is $400,000, using 80,000 direct labor hours.
-If a desk lamp requires 1 hour of fabrication and 2 hours of assembly, the amount of factory overhead that Kaumajet Factory will allocate to each unit of desk lamp using the multiple production department factory overhead rate method with an allocation base of direct labor hours is

• A)$11.10
• B)$4.91
• C)$5.00
• D)$7.20

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Definitions:

Monopolistic Competition

A market structure in which many firms sell a differentiated product, entry is relatively easy, each firm has some control over its product price, and there is considerable nonprice competition.

Market Structure

The characteristics of an industry that define the likely behavior and performance of its firms. The primary characteristics are the number of firms in the industry, whether they are selling a differentiated product, the ease of entry, and how much control firms have over output prices. The most commonly discussed market structures are pure competition, monopolistic competition, oligopoly, pure monopoly, and monopsony.

Product Development

The process of bringing a new product or service to the market, which includes ideation, design, development, testing, and launching.

Differentiation

The process by which companies distinguish their products or services from others in the market to create a perceived value and gain a competitive edge.