Use Information Below to Answer the Following Questions -Refer to the Table Above

question 28

Multiple Choice

Use information below to answer the following questions.
Oswald Ltd manufactures a wide range of leather suitcases. The following costs are expected to be incurred by the company during June: $\begin{array}{lr}\text { Ind irect labour cost } & \$ 26,000 \\\text { Direct labour time } & 10,000 \text { hours }\\\text { Depreciation on equipment } & \$ 20,000 \\\text { Rent and Rates } & \$ 13,000 \\\text { Direct labour costs } & \$ 98,000 \\\text { Heating, lighting and power } & \$ 4,000 \\\text { Machine time } & 8,000\text { hours } \\\text { Indirect materials } & \$ 5,000 \\\text { Consumables } & \$ 2,000 \\\text { Direct materials used } & \$ 50,000 \\\text { Production estimate } & 1,000\text { suitcases }\\\end{array}$
-Refer to the table above. The management accountant at Oswald Ltd, wants to revise his estimates and use machine hours as the allocation base to determine the overhead recovery rate. The revised overhead recovery rate (rounded) per machine hour will be:

• A)$4.88 per MH.
• B)$9.00 per MH.
• C)$7.38 per MH.
• D)$8.75 per MH.

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Definitions:

Direct Expenses

Costs that can be directly traced to producing specific goods or services and can vary with the level of production.

Indirect Expenses

Expenses that cannot be directly linked to the production of goods or services, such as administrative salaries and utilities.

Contribution Margin

The Contribution Margin represents the amount of revenue from sales that exceeds variable costs, contributing to covering fixed costs and generating profit.

Sales

The total amount of revenue generated by the selling of goods or services by a company within a specific period.