Compton Company Uses a Predetermined Overhead Rate in Applying Overhead

question 49

Multiple Choice

Compton Company uses a predetermined overhead rate in applying overhead to production orders on a labour cost basis in Department A and on a machine hours basis in DepartmentB.At the beginning of the most recently completed year,the company made the following estimates: What predetermined overhead rate would be used in Department A and Department B,respectively?

• A) 83% and $5.
• B) 83% and $3.
• C) 120% and $3.
• D) 81% and $3.

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Definitions:

Contribution Margin

The amount by which a product's sales revenue exceeds its variable costs, indicating how much contributes to covering fixed costs and generating profit.

Shareholders' Equity

The residual interest in the assets of a corporation after deducting its liabilities; also known as stockholders' equity, representing the owners' equity in the company.

Light-Emitting Diode

A semiconductor device that emits light when an electrical current passes through it, used in a wide range of lighting and electronic displays.

Incandescent Bulb

A traditional light bulb that produces light through the heating of a filament until it glows.