Watson's Computer Company Uses ABC to Account for Its Manufacturing

question 46

Multiple Choice

Watson's Computer Company uses ABC to account for its manufacturing process. Watson's Computer Company expects to produce 2170 computers. Watson's Computer Company also expects to use 14,000 parts and have 40 setups.
The allocation rate for machine setups is

• A)$6.60
• B)$750
• C)$245
• D)$375

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Definitions:

Firm's Beta

A measure of a stock's volatility in relation to the overall market; a beta greater than 1 means the stock is more volatile than the market, while a beta less than 1 means it is less volatile.

Single-Factor Market Model

A financial model that explains a security's returns as the outcome of a single market-wide factor and the security's sensitivity to that factor.

Unsystematic Risk

The risk associated with a specific company or industry that can be mitigated through diversification.

Residuals

Residuals are differences between observed and predicted values in statistical models, used to assess the fit of models to data.