Reference: 22_06
Mach Co -Department 1's Contribution to Overhead as a Percent of Sales

question 140

Multiple Choice

Reference: 22_06
Mach Co. operates three manufacturing departments as profit centers. The following information is available for its most recent year:
$\begin{array}{ccccc}&&\text {Cost of}&\text {Direct}&\text {Indirect}\\\text { Dept. } &\text { Sales } &\text { Goods Sold } & \text { Expenses }&\text { Expenses }\\1 & \$ 1,000,000 & \$ 700,000 & \$ 100,000 & \$ 80,000 \\2 & 400,000 & 150,000 & 40,000 & 100,000 \\3 & 700,000 & 300,000 & 150,000 & 20,000\end{array}$

-Department 1's contribution to overhead as a percent of sales is:

• A) 8%
• B) 40%
• C) 20%
• D) 30%
• E) 12%

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Definitions:

Resale

The act of selling a previously bought product, typically used, to another buyer.

Status Quo Bias

The tendency for people to prefer things to stay the same by doing nothing or sticking with a decision made previously.

Prospect Theory

A psychological theory that describes how people make decisions based on the potential value of losses and gains rather than the final outcome.

Endowment Effect

A psychological phenomenon where people ascribe more value to things merely because they own them.