(Appendix 10A) Stopyra Incorporated Makes a Single Product--A Cooling Coil

question 116

Multiple Choice

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

-If the denominator level of activity is 7,500 machine-hours,the fixed component in the predetermined overhead rate would be:

• A) $192.28 per machine-hour
• B) $211.28 per machine-hour
• C) $19.00 per machine-hour
• D) $1,900.00 per machine-hour

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Definitions:

Income Elasticity

A measure of how the demand for a good or service changes with a change in consumers' income.

Normal Good

A type of good for which demand increases when consumer income rises, and decreases when consumer income decreases.

Inferior Good

A type of good for which demand decreases as the income of consumers increases, opposite to normal goods.

Income Elasticity

A measure of how much the demand for a good or service changes with a change in consumers' income, indicating the nature of the good as either a necessity or a luxury.