Polson Pool Company Is Involved in a Number of Competitive

question 45

Multiple Choice

Polson Pool Company is involved in a number of competitive bidding situations. The following costs are anticipated for a project to be bid for Terrance Manufacturing:

Which of these costs would be treated differently if Polson had either excess capacity or no excess capacity?

• A) Direct materials used, $680,000.
• B) Direct labor, $2,450,000.
• C) Allocated variable overhead, $570,000.
• D) Allocated fixed cost, $230,000.
• E) None of these, as all four costs are considered in both situations.

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Definitions:

Financially Better

A state or condition where financial health, performance, or position has improved or is superior to a previous state or to another entity's state.

Total Contribution Margin

The difference between total sales revenue and total variable costs, indicating how much revenue contributes toward covering fixed costs and generating profit.

Machine Hours

A measure of production output or activity based on the number of hours machines are operated.

Unlimited Demand

A market scenario where the desire for a product surpasses the available supply at any price.