Answer the Following Questions Using the Information Below

question 118

Multiple Choice

Answer the following questions using the information below:
Velshi Printers has contracts to complete weekly supplements required by forty-six customers. For the year 2010, manufacturing overhead cost estimates total $840,000 for an annual production capacity of 12 million pages.
For 2010 Velshi Printers has decided to evaluate the use of additional cost pools. After analyzing manufacturing overhead costs, it was determined that number of design changes, setups, and inspections are the primary manufacturing overhead cost drivers. The following information was gathered during the analysis:
During 2010, two customers, Money Managers and Hospital Systems, are expected to use the following printing services:

-When costs are assigned using the single cost driver, number of pages printed, then:

• A)Velshi Printers will want to retain this highly profitable customer
• B)Money Managers will likely seek to do business with competitors
• C)Money Managers is unfairly over billed for its use of printing resources
• D)Money Managers is grossly under billed for the job, while other jobs will be unfairly over billed

---

Definitions:

Fixed Costs

Costs that remain constant regardless of the amount of goods produced or sold, including expenses like rent, wages, and insurance premiums.

Operating Income

measures a company's profit after deducting operating expenses like wages and cost of goods sold, but before interest and taxes.

Unit Selling Price

The price for which a single unit of a product is sold, not including discounts or promotions.

Unit Variable Costs

Costs that vary directly with the level of production or output, unlike fixed costs, which remain constant regardless of production volume.