Fixed Manufacturing Overhead Costs Remain Constant at $400,000 Per Month

question 40

Multiple Choice

Fixed manufacturing overhead costs remain constant at $400,000 per month and are allocated based on a monthly professional labor-hour allocation rate.Professional labor hours are estimated at 12,000 for high-output months and 3,000 for low-output months.The final customer price includes a markup of 50% of cost.As a result:

• A)low-output months will allocate less manufacturing overhead costs to each job.
• B)low-output months will deter customers due to the higher prices.
• C)the high-output months present a more accurate method of pricing.
• D)an annual allocation rate would result in lower prices during the high-output months than the monthly allocation rate.

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Definitions:

Cork Cambium

A layer of tissue in plants that produces cork cells to form bark and protect the plant.

Periderm

A protective tissue in plants that replaces the epidermis in secondary growth, found in stems and roots of woody plants.

Epidermis

The outermost layer of cells in the skin and plants, serving as a protective barrier against environmental threats.

Herbaceous Eudicot

A type of flowering plant that does not have woody stems above the ground, and has leaves and stems that die down at the end of the growing season.