Vanguard Combines All Manufacturing Overhead into a Single Cost Pool

question 66

Multiple Choice

Vanguard combines all manufacturing overhead into a single cost pool and allocates this overhead to products by using machine hours. Activity-based costing would likely show that with Vanguard's current procedures:

• A)all of the company's products are undercosted.
• B)the company's high-volume products are undercosted.
• C)all of the company's products are overcosted.
• D)the company's high-volume products are overcosted.
• E)the company's low-volume products are overcosted.

---

Definitions:

Demand Curve

A graph showing the relationship between the price of a good or service and the quantity demanded for a given period.

Short-Run Equilibrium

Short-run equilibrium occurs when in a market, the quantity supplied equals the quantity demanded at the current price, before any long-term adjustments are made.

MR > MC

A situation in marginal analysis where the marginal revenue (MR) exceeds the marginal cost (MC), suggesting a potential increase in profitability by expanding production.

P > ATC

A scenario in which the price of a good is greater than the average total cost of producing that good, indicating potential profitability for the firm.