Franklin Manufacturing Manufactures Two Models of Windows,bay Windows and Casement

question 93

Multiple Choice

Franklin Manufacturing manufactures two models of windows,bay windows and casement windows.Franklin uses an activity based costing system.The following information about the activities used to producet the company's products has been provided. Produce
Agree.Change made.JMF $\begin{array}{|l|c|c|c|c|}\hline {\text { Category }} & {\text { Estimated Cost }} & \text { Cost Driver } & \text { Bay Windows } & \text { Casement } \\\hline \text { Unit-level } & \$ 125,000 & \text { Labor hours } & 750 & 500 \\\hline \text { Batch-level } & \$ 75,000 & \text { Inspections } & 30 & 20 \\\hline \text { Product-level } & \$ 35,000 & \text { Storage Space } & 3500 \text { sq feet } & 2100 \text { sq feet } \\\hline \text { Facility-level } & \$ 165,000 & \text { Machine hours } & 9,000 & 6,000 \\\hline\end{array}$ If bay windows and casement windows require the same amount of direct labor,using labor hours as the allocation base for facility-level costs would:

• A) undercost the casement windows.
• B) overcost the bay windows.
• C) undercost both the bay windows and casement windows.
• D) None of these answers is correct.
• Produce
• Agree.Change made.JMF

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Definitions:

Net Income

The overall income a company retains following the subtraction of all costs and tax obligations from its earnings.

Net Cash Inflows

The total amount of cash received minus the total amount of cash outflows over a specified period.

Operating Income

Operating income is the profit earned from a firm's normal business operations, excluding non-operating income and expenses like interest and taxes.

Cash Payback Period

The duration it takes for an investment to generate cash flows sufficient to recover the initial investment cost, often used in capital budgeting to assess investment attractiveness.