Answer the Following Questions Using the Information Below:
Ghan Collectibles

question 105

Multiple Choice

Answer the following questions using the information below:
Ghan Collectibles produces T-shirts and sweatshirts.Product profitability is analysed as follows:
$\begin{array} { l r r } & \text { T-SHIRTS } & \text { SWEATSHIRTS } \\ \text { Production and sales volume } & 60000 \text { units } & 35000 \text { urits } \\ \text { Selling price } & \$ 16.00 & \$ 29.00 \\ \text { Direct material } & \$ 2.00 & \$ 5.00 \\ \text { Direct labour } & \$ 4.50 & \$ 7.20 \\ \text { Manufacturing overhead } & \$ 2.00 & \$ 3.00 \\ \text { Gross profit } & \$ 7.50 & \$ 13.80 \\ \text { Selling and administrative } & \$ 4.00 & \$ 7.00 \\ \text { Operating profit } & \$ 3.50 & \$ 6.80 \end{array}$

Ghan Collectibles's managers have decided to revise their current assignment of overhead costs to reflect the following $\mathrm { ABC }$ cost information:

$\begin{array}{c}\text { Activities demanded }\\\begin{array}{rr}\text { T-SHIRTS } & \text { SWEATSHIRTS } \\0.75 \mathrm{DLH} / \text { unit } & 1.2 \mathrm{DLH} / \mathrm{unit} \\45000 \mathrm{DLHs} & 42000 \mathrm{DLHs} \\60000 \text { inspections } & 17500 \text { inspections }\end{array}\end{array}$
-Under the revised ABC system,total overhead costs allocated to sweatshirts will be:

• A)$48 720
• B)$76 720
• C)$224 920
• D)None of these answers are correct.

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Definitions:

Collateral

A form of security provided by the borrower to the lender, consisting of property or assets, that can be taken possession of should the borrower fail to repay the loan.

Unconscionability

describes a situation where a contract or clause is so unfair to one party that no reasonable or informed person would agree to it.

Good Faith

Acting with honest intent and without intent to defraud or seek unfair advantage.

Default

Failure to fulfill an obligation, especially failure to meet a financial obligation or appear in a legal action.