Answer the Following Questions Using the Information Below

question 53

Multiple Choice

Answer the following questions using the information below:
Whitman Printing has contracts to complete weekly supplements required by forty-six customers. For the year 20X5, manufacturing overhead cost estimates total $840,000 for an annual production capacity of 12 million pages.
For 2010 Whitman Printing 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 Hospital Systems:

• A)is fairly billed because resources are allocated uniformly to all jobs
• B)is grossly under billed for the job, while other jobs will be unfairly over billed
• C)will likely seek to do business with competitors
• D)will contribute too little to profits, and Wallace Printing will not want to accept additional work from the company

---

Definitions:

Production Time

The total time required to manufacture a product, from the start of production to the final product being ready for sale.

Sales Mix

The combination of different products or services that a company sells, typically analyzed to understand their relative contributions to overall sales.

Operating Loss

A situation where a company's operating expenses exceed its gross profits, indicating a negative performance.

Fixed Costs

Expenses that do not change with the level of production or sales over a short period, such as rent, salaries, and insurance.