Seldomridge, Inc

question 105

Multiple Choice

Seldomridge, Inc., manufactures and sells two products: Product I5 and Product U0.Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: The direct labor rate is $24.40 per DLH.The direct materials cost per unit for each product is given below: The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: The unit product cost of Product U0 under activity-based costing is closest to:

• A)$1,672.35 per unit
• B)$2,504.73 per unit
• C)$2,042.50 per unit
• D)$2,885.25 per unit

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Definitions:

Contribution Margin

The difference between sales revenue and variable costs of a product or service, indicating how much contributes towards covering fixed costs and profit.

Variable Costs

Costs that vary in direct proportion to changes in the level of production or sales.

Fixed Costs

Expenses that remain constant regardless of the level of output or sales, including rent, wages, and insurance costs.

Margin of Safety

The difference between actual or expected sales and sales at the break-even point. It measures how close a company is to not covering its fixed costs.