Wisteria Company Is Debating the Use of Direct Labour Cost

question 162

Essay

Wisteria Company is debating the use of direct labour cost or direct labour hours as the cost allocation base for allocating manufacturing overhead.The following information is available for the most recent year:

Determine the following:
A)Predetermined manufacturing overhead rate using direct labour cost as the allocation base
B)Predetermined manufacturing overhead rate using direct labour hours as the allocation base
C)Allocated manufacturing overhead costs based on direct labour cost for the year
D)Allocated manufacturing overhead costs based on direct labour hours for the year

• A)Predetermined manufacturing overhead rate using direct labour cost as the allocation base
• B)Predetermined manufacturing overhead rate using direct labour hours as the allocation base
• C)Allocated manufacturing overhead costs based on direct labour cost for the year
• D)Allocated manufacturing overhead costs based on direct labour hours for the year

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Definitions:

Producer Surplus

The difference between the amount producers are willing to supply goods for and the actual amount received by them when sold.

Perfectly Competitive Industry

An economic theory describing a market structure where firms sell identical products, no single buyer or seller can influence the market price, and information is freely available.

AC

AC, or Average Cost, is the cost per unit of output, calculated by dividing the total cost by the quantity of output produced.

Consumer Surplus

The difference between what consumers are willing to pay for a good or service and what they actually pay, reflecting the economic benefit to consumers.