(Appendix 10A) Arca Incorporated Makes a Single Product--A Critical Part

question 130

Multiple Choice

(Appendix 10A) Arca Incorporated makes a single product--a critical part used in commercial airline seats. The company has a standard cost system in which it applies overhead to this product based on the standard machine-hours allowed for the actual output of the period. Data concerning the most recent year appear below:

-The variable component of the predetermined overhead rate is closest to:

• A) $0.44 per machine-hour
• B) $1.29 per machine-hour
• C) $0.33 per machine-hour
• D) $0 .44 per machine-hour

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Definitions:

Transferred Out

This term is used in accounting to describe costs or goods that are moved from one production process or department to another.

Materials

Raw substances used in the manufacturing process to create a finished product.

Equivalent Unit

A concept used in cost accounting to convert partially completed goods into a number of completed units for accounting purposes, considering the degree of completion.

First Processing Department

The initial stage in a manufacturing process where raw materials are first transformed into work-in-process.