Figure 3 Ray Manufacturing Has Four Categories of Overhead. the Four Categories

question 59

Multiple Choice

Figure 3
Ray Manufacturing has four categories of overhead. The four categories and the expected overhead costs for each category for next year are as follows:
Currently, overhead is applied using a predetermined overhead rate based upon budgeted direct labour hours. For next year, 100,000 direct labour hours are budgeted.
The company has been asked to submit a bid for a proposed job. The plant manager feels that obtaining this job would result in new business in future years. Usually bids are based upon full manufacturing cost plus 10 percent.
Estimates for the proposed job are as follows:
The plant manager has heard of a new way of applying overhead that uses cost pools and cost drivers. Expected activity for the four activity-based cost drivers that would be used are as follows:

-Refer to Figure 3 above. If Ray Manufacturing used machine hours to assign maintenance costs, the amount of maintenance costs allocated to the proposed job would be

• A) £102,000
• B) £48,800
• C) £37,400
• D) £34,000

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Definitions:

Gross Earnings

The total income earned by an individual or company before any deductions or taxes.

Convention Centre

A large facility designed to host conferences, meetings, exhibitions, and other events.

Regular Hourly Rate

The wage earned for each hour of work, not including overtime rates.

Time And a Half

Refers to the rate of pay that is 50% higher than an employee's regular rate, often used for overtime work.