Quick Step Company Is Debating the Use of Direct Labor

question 309

Multiple Choice

Quick Step 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 Quick Step Company uses direct labor hours as the allocation base, what would the predetermined manufacturing overhead rate be?

• A)$1.50 per direct labor hour
• B)$1.70 per direct labor hour
• C)$1.40 per direct labor hour
• D)$1.83 per direct labor hour

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Definitions:

Retained Earnings

The portion of net earnings not paid out as dividends but retained by the company to reinvest in its core business or to pay debt.

Balance Sheet

A business statement that consolidates the assets, debts, and shareholder equity of a company at a certain point.

Net Income

The amount of profit left after all expenses, taxes, and costs have been subtracted from total revenue.

Retained Earnings

The portion of a company's profits not distributed to shareholders as dividends but retained by the company for reinvestment or to pay off debt.