Bill Bonecrusher Graduates from College with a Choice of Playing

question 345

Multiple Choice

Bill Bonecrusher graduates from college with a choice of playing professional football at $2 million a year or coaching for $50,000 a year. He decides to play football, but eight years later he quits football to make movies for $3 million a year. His opportunity cost at graduation was ________ and eight years later was ________.

• A) $50,000; $2 million
• B) $2 million; $2 million
• C) $2 million; $3 million
• D) $50,000; $50,000

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Definitions:

Overapplied Overhead

When the allocated manufacturing overhead cost exceeds the actual overhead incurred, resulting in a surplus in the cost coverage.

Activity Cost Pools

Aggregations of all the costs associated with particular activities, used in activity-based costing.

Expected Activity

The anticipated level of operations or output, often used in budgeting and planning.

Predetermined Overhead Rate

A calculated estimate used for allocating overhead costs to products or services, based on an established measure such as labor hours or machine usage, facilitating budgeting and financial planning.