The Direct Material Cost Is $10,000 When 2,000 Units Are

question 45

Multiple Choice

The direct material cost is $10,000 when 2,000 units are produced.What is the direct material cost for 2,500 units produced?

• A)$8,000
• B)$10,000
• C)$12,500
• D)$15,000

---

Definitions:

Traditional Costing System

A cost accounting method that assigns overhead costs to products based on a predetermined overhead rate and actual levels of a cost driver.

Overhead Cost

Indirect expenses related to the general operation of a business, such as rent, utilities, and administrative salaries, not directly tied to any specific product or service.

Direct Labor-Hours

The total hours worked by employees who are directly involved in the production process, often used to allocate manufacturing overhead.

Activity-Based Costing

A costing method that allocates overhead costs to products based on the activities required to produce them.