A Company Manufactures Three Products, A, B, and C from a Single

question 83

Multiple Choice

A company manufactures three products, A, B, and C from a single raw material input. Product C can be sold at the split-off point for total revenues of $60,000 or it can be processed further at a total cost of $16,000 and then sold for $78,000. Product C:

• A) should be sold at the split-off point, rather than processed further.
• B) would increase the company's overall net income by $18,000 if processed further and then sold.
• C) would increase the company's overall net income by $78,000 if processed further and then sold.
• D) would increase the company's overall net income by $2000 if processed further and then sold.

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Definitions:

Predetermined Manufacturing Overhead

An estimated rate used to assign manufacturing overhead costs to cost objects during a specific period, calculated before the period begins.

Direct Labor-hour

A measure of the total time workers or employees spend creating a product, which is used in calculating the labor cost involved in production.

Finished Goods Inventories

Products that have completed the manufacturing process but have not yet been sold to customers.

Direct Labor Costs

The wages paid to workers directly involved in the production of goods or services.