Use the Information Below to Answer the Following Questions

question 95

Multiple Choice

Use the information below to answer the following questions.
Fact 12.1.1 Money in the Bank
Two gas stations stand on opposite sides of the road: Rutter's Farm Store and Sheetz gas station. Rutter's doesn't even have to look across the highway to know when Sheetz changes its price for gas. When Sheetz raises the price, Rutter's pumps are busy. When Sheetz lowers prices, there's not a car in sight. Both gas stations survive but each has no control over the price.
Source: The Mining Journal, May 24, 2008
-Refer to Fact 12.1.1. Each of these gas stations has little control over the price of gasoline because

• A)the price of gasoline is determined by head office.
• B)lowering the price will eliminate competition and the government mandates that gasoline stations must have competition.
• C)if it raises its price, the station will lose customers.
• D)the price of gasoline is set according to the price of oil.
• E)the demand for gasoline is perfectly inelastic.

Identify the role of machine-hours and other allocation bases in overhead rate calculation.

Understand the financial implications of basing overhead rates on estimated vs. capacity activity levels.

Calculate the estimated total manufacturing overhead for the year.

Calculate the predetermined overhead rate for the year.

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Definitions:

Straight-Line Depreciation

An equal expense allocation method over the anticipated productive life of an asset.

Initial Investments

The upfront costs associated with starting a new project, business venture, or investment, crucial for calculating future returns and break-even points.

Income Tax Rate

The Income Tax Rate is the percentage at which an individual or corporation is taxed on their income, varying according to earnings and jurisdictional tax laws.

After-Tax Discount Rate

The rate of return used in capital budgeting that accounts for taxes, providing a more accurate measure of net present value or investment profitability.