Arquebus Company Is Owned and Operated by a Craftsman Who

question 115

Multiple Choice

Arquebus Company is owned and operated by a craftsman who makes replicas of historic firearms for museums, sportsmen and collectors. He is currently producing 40 flintlock muskets per month. Cost data are as follows: In June, the cost of the special kind of metal he uses went up considerably, and the variable cost per unit increased by $50 per unit. If volume and other factors remain constant, how will this affect the company's breakeven point in sales dollars?

• A)It will go up by $5,760 of sales revenue.
• B)It will go up by $2,400 of sales revenue.
• C)It will go down by $400 of sales revenue.
• D)It will go down by $2,720 of sales revenue.

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Definitions:

Predetermined Overhead Rate

An allocated rate used to apply manufacturing overhead to products or job orders, estimated at the start of an accounting period.

Job-Order Costing

A costing system used to accumulate costs for individual jobs or orders, typically used when products or services are distinct and customized.

Predetermined Overhead Rate

A rate calculated before a period begins, used to allocate estimated overhead costs to products or job orders based on a selected activity base.

Automated Jointer

A machine tool used in woodworking that automatically creates a flat surface along the length of a board or piece of lumber.