A Business Makes Three Different Products, the Details of Which

question 11

Multiple Choice

A Business makes three different products, the details of which follow: $\begin{array}{llll}\text { Product code } & \mathrm{A} 1 & \mathrm{~A} 2 & \mathrm{~A} 3 \\\text { Selling price } & \$ 50 & \$ 46 & \$ 40 \\\text { Variable cost } & \$ 20 & \$ 24 & \$ 16 \\\text { Weekly demand-units } & 50 & 40 & 60 \\\text { Machine time per unit } & 4 \text { hours } & 4 \text { hours } & 6 \text { hours }\end{array}$ The maximum machine time available is 350 hours per week. How many machine hours should be spent manufacturing product A3?

• A)35 machine hours
• B)240 machine hours
• C)120 machine hours
• D)None

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Definitions:

Capital Lease Obligation

A lease classified as a purchase agreement for accounting purposes, wherein the lessee records the leased asset as an owned asset on the balance sheet.

Capital Lease

A lease agreement that transfers substantially all the risks and rewards of ownership of the asset to the lessee, effectively treated as a purchase of the asset.

Periodic Cash Payments

Payments made regularly over a period of time, such as dividends or loan repayments.

Lease Rental Expense

An expense incurred from leasing an asset, which is typically recorded on a lessee's income statement.