A Company Has Accepted a Contract to Produce a Special

question 78

Multiple Choice

A company has accepted a contract to produce a special electric motor. The number of direct labour hours required to produce the first motor is 250. If an 85% learning curve applies to the production of motors, then the number of labour hours needed to produce the 4^th motor is

• A) 212.5 hours.
• B) 180.6 hours.
• C) 153.5 hours.
• D) 0 37.5 hours

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Definitions:

Income Recognition

The accounting principle that revenue should only be recognized after the business has fulfilled its obligations and the payment is certain.

Direct Method

A method for creating a cash flow statement where actual cash flow information from operations is used rather than adjustments to net income.

Operating Cash Receipts

Cash received by a company from its core business operations.

Cash Flow

Indicates the total amount of money being transferred into and out of a business, particularly affecting its liquidity.