Nadal Company Is Debating the Use of Direct Labor Cost

question 138

Multiple Choice

Nadal Company is debating the use of direct labor cost or direct labor hours as the cost allocation base for allocating manufacturing overhead.The following information is available for the most recent year:

If Nadal Company uses direct labor cost as the allocation base,what would the predetermined manufacturing overhead rate be?

• A)80%
• B)70%
• C)75%
• D)86%

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Definitions:

Economic Profits

The difference between total revenue and the total costs (both explicit and implicit costs) of a company, indicating the surplus generated from business activities.

Savings Account

An account for holding deposits at a bank or another financial entity, ensuring the safety of the principal amount while offering a slight interest rate.

Annual Interest

The amount of interest due over the course of a year on borrowed capital or invested funds.

Accounting Profits

The difference between a company's total revenue and its explicit costs, not including opportunity costs.