Simplex Company Has the Following Estimated Costs for Next Year

question 16

Multiple Choice

Simplex Company has the following estimated costs for next year:
$\begin{array}{|l|r|}\hline \text { Direct materials } & \$ 15,000 \\\hline \text { Direct labour } & 55,000 \\\hline \text { Sales commissions } & 75,000 \\\hline \text { Salary of production supervisor } & 35,000 \\\hline \text { Indirect materials } & 5,000 \\\hline \text { Advertising expenses } & 11,000 \\\hline \text { Rent on factory equipment } & 16,000 \\\hline\end{array}$
Simplex estimates that 10,000 direct labour and 16,000 machine hours will be worked during the year.If overhead is applied on the basis of machine hours,what will be the overhead rate per hour?

• A) $3.50.
• B) $6.94.
• C) $7.63.
• D) $8.56.

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Definitions:

Laspeyres Price Index

A price index used to measure the change in the cost of purchasing a fixed basket of goods and services over time, based on the quantities purchased in the base period.

Consumption Bundle

A set of goods or services that an individual or household chooses to consume within a given period, reflecting their preferences and budget constraint.

Prices

Monetary values assigned to goods and services, determining what amount of money is needed to purchase them.

Laspeyres Price Index

A measure of the change in the aggregate price level of a basket of goods and services over time, using the quantities purchased in the base year.