Acti Manufacturing Corporation Is Estimating the Following Raw Material Purchases

question 131

Multiple Choice

Acti Manufacturing Corporation is estimating the following raw material purchases for the final four months of the year:
At Acti, 40% of raw materials purchases are normally paid for in the month of purchase. The remaining 60% is paid for in the month following the purchase.
-If the budgeted direct labor time for December is 8,000 hours,then average budgeted manufacturing overhead per direct labor-hour is closest to:

• A) $14.38 per direct labor-hour
• B) $9.38 per direct labor-hour
• C) $12.50 per direct labor-hour
• D) $16.25 per direct labor-hour

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Definitions:

Margin

Typically refers to the difference between the selling price of a product and its cost, used to measure profitability.

Turnover

The rate at which inventory or assets are sold and replaced or the rate at which employees are replaced in a business.

Residual Income

The amount of income that an investment or project generates above the minimum rate of return.

Residual Income

The profit left over after all necessary capital expenses are subtracted from the operating income, serving as an indicator of financial success.