Zephyr Corporation Has Provided the Following Data from Its Activity-Based

question 34

Multiple Choice

Zephyr Corporation has provided the following data from its activity-based costing system: $$\begin{array} { l l l } \text { Activity Cost Pool } & \text { Overhead Cost } & \text { Total Activity } \\\text { Assembly } & \$ 383,180 & 23,000 \text { machine hours } \\\text { Processing orders } & \$ 50,798 & 1,100 \text { orders } \\\text { Inspection } & \$ 106,110 & 1,620 \text { inspection hours }\end{array}$$ Data concerning one of the company's products, Product LM41, appear below.
$\begin{array}{llr} \text { Selling price per unit } &\$124.60\\ \text { Direct materials cost per unit} &\$22.08\\ \text { Direct labor cost per unit } &\$45.77\\ \text {Annual unit production and sales } &210\\ \text {Orders processed } &80\\ \text { Annual machine hours } &320\\ \text {Annual inspection hours } &10\\\end{array}$

According to the activity-based costing system, the product margin for product LM41 is:

• A) $3,178.20
• B) $11,917.50
• C) $5,931.30
• D) $2,891.90
• E) $2,236.90

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Definitions:

Predictive Validity

Involves the extent to which a test or measure accurately predicts future performance or outcomes.

Construct Validity

The extent to which a selection tool measures a theoretical construct or trait

Concurrent Validity

The extent to which the results of a particular test or measurement correspond to those of a previously established test or measurement conducted at the same time.

Content Validity

A measure of whether a test or tool covers a comprehensive range of relevant aspects of the subject it aims to assess.