You Have a Used CD Store

question 12

Multiple Choice

You have a used CD store.At an estate sale,you can purchase 260 compact discs for $400.You believe you could sell the CDs for an average of $2.50 each.What is the net benefit of buying the CDs at the estate sale and selling them in your store?

• A)$650
• B)$400
• C)$1050
• D)$250

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Definitions:

Direct Labor-hours

The sum of time spent by employees directly involved in the creation of a product, often used to allocate manufacturing costs.

Manufacturing Overhead

All indirect costs associated with the production process, including utilities, maintenance, and salaries of non-direct labor.

Predetermined Overhead Rate

A rate used to allocate indirect costs to products or services, calculated before the accounting period begins based on estimated costs and activity levels.

Direct Labor-hour

A metric that calculates the total number of hours worked by employees directly involved in manufacturing a product or providing a service.