Watson,Inc

question 13

Multiple Choice

Watson,Inc.applies overhead cost based on direct labor hours.In completing the 200 units in job #120, the company incurred $12,000 in direct materials and 500 direct labor hours at $18 per hour. The predetermined overhead rate is $6 per direct labor hour. What is the total cost of the units in job #120?

• A) $18,600
• B) $21,000
• C) $22,200
• D) $24,000

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Definitions:

Financial Leverage

The use of borrowed capital or debt to increase the potential return of an investment, amplifying both potential gains and losses.

Operating Leverage

A measure of how sensitive a company’s operating income is to a change in its sales volume, emphasizing the cost structure between fixed and variable costs.

EBIT

A gauge of company profits, Earnings Before Interest and Taxes, leaves out the charges for interest and taxes to show raw earnings.

Sales

The transactions involved in selling goods or services in the normal course of business, generating revenue for the company.