Case Company Allocates $5 A)25,000 MH
B)137,500 MH
C)82,500 MH
D)88,000 MH
E)33,000 MH

question 137

Multiple Choice

Case Company allocates $5.00 overhead to each unit produced.The company uses a plantwide overhead rate with machine hours as the allocation base.Given the amounts below, how many machine hours does the company expect in department 2? $$\begin{array} { l c c } \text { Estimated: } & \text { Department 1 } & \text { Department } 2 \\\text { Marufacturing overhead costs } & \$ 250,000 & \$ 150,000 \\\text { Direct labor hours } & { 8 , 0 0 0 D L H } & 12,000 \mathrm { DLH } \\\text { Machine hours } & 55,000 \mathrm { MH } & ? \mathrm { MH }\end{array}$$

• A)25,000 MH
• B)137,500 MH
• C)82,500 MH
• D)88,000 MH
• E)33,000 MH

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Definitions:

Total Cost

The complete cost of production that includes both fixed and variable costs.

Breakeven

The point at which total costs and total revenues are equal, resulting in no net loss or gain.

Revenue

Income that a company receives from its normal business activities, usually from the sale of goods and services to customers.

Operating Leverage

A measure of how revenue growth translates into growth in operating income, influenced by the proportion of fixed to variable costs in a company's cost structure.