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

question 39

Multiple Choice

Use the information below to answer the following questions.
Sales Extraordinaire sells one particular photo frame. It estimates that it can sell as many frames as it produces. $\begin{array}{lr}\text { Sales price per unit } & \$ 6.00 \\\text { Variable cost per unit } & \$ 3.00 \\\text { Fixed costs per annum } & \$ 9,000\end{array}$
-Refer to the table above. Increasing the sales price to $8.00 and having a sales volume of 3,000 photo frames would result in:

• A)a profit of $6,000.
• B)a loss of $1,000.
• C)breaking even.
• D)a profit of $1,000.

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Definitions:

Predetermined Overhead Rate

An estimated rate used in costing to allocate overhead costs to products or services based on a set criterion, such as machine hours or labor costs.

Predetermined Overhead Rate

A rate used to allocate manufacturing overhead costs to products, calculated at the beginning of the period based on estimated costs and activity levels.

Overapplied Overhead

A situation where the allocated manufacturing overhead cost is more than the actual overhead cost incurred.

Underapplied Overhead

A situation where the allocated manufacturing overhead cost is less than the actual overhead incurred, resulting in a cost that needs to be accounted for in the financial statements.