The Setup Cost to Make Carpets Is $20 Per Setup

question 42

Multiple Choice

The setup cost to make carpets is $20 per setup.The holding cost is $1.75 per yard per year,and the annual demand is 12,000 yards of carpet per year.The manufacturing facility operates 300 days,and 120 yards of the carpet are produced per day.What is the total annual setup cost under the economic production quantity policy?

• A)$374.17
• B)$458.26
• C)$561.25
• D)$1,122.50

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Definitions:

Predetermined Overhead Rate

A rate used to allocate manufacturing overhead costs to products or job orders, calculated before the period begins based on estimated overhead and activity levels.

Machine-Hours

Rephrased: The total hours that machinery is in operation during a specific period, used as a basis for allocating manufacturing overhead costs.

Predetermined Overhead Rate

A rate calculated to estimate the manufacturing overhead cost per unit of production activity, aiding in budgeting and cost control.

Machine-Hours

A measure of production output or activity based on the number of hours machines are operated within a specified period.