Answer the Following Questions Using the Information Below:
Cathfree Inc

question 179

Multiple Choice

Answer the following questions using the information below:
Cathfree Inc.expects to sell 35 000 athletic uniforms for $70 each in 2018.Direct materials costs are $20,direct manufacturing labour is $8,and manufacturing overhead is $6 for each uniform.The following inventory levels apply to 2017:
$$\begin{array} { l r r } & \text { Beginning inventory } & \text { Ending inventory } \\\text { Direct materials } & 12000 \text { units } & 10000 \text { units } \\\text { Work-in-process inventory } & 0 \text { units } & 0 \text { units } \\\text { Finished goods inventory } & 6000 \text { units } & 5000 \text { units }\end{array}$$
-What is the amount budgeted for direct material purchases in 2018?

• A)$640 000
• B)$760 000
• C)$600 000
• D)$580 000

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Definitions:

Predetermined Overhead Rate

A rate determined prior to the start of a period, designed for assigning anticipated overhead expenses to products or job orders, utilizing a selected activity basis for calculation.

Manufacturing Overhead

Costs in the manufacturing process that are not direct labor or materials.

Direct Labor-Hours

A measure of the labor directly involved in manufacturing a product, expressed in hours.

Predetermined Overhead Rate

A pre-determined rate for distributing overhead expenses to products or job orders, calculated prior to the beginning of the period using projected costs and estimated levels of activity.