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:

Entities

Organizations or businesses that exist as distinct legal, financial, and operational units for accounting purposes.

Receivables

Money owed to a company by its customers or other parties for goods or services that have been delivered but not yet paid for.

Older Accounts

Refers to accounts receivable that have been outstanding for a longer period, often categorized by how long they have been unpaid (e.g., 30 days, 60 days).

Aging of Receivables Method

This is an accounting technique used to estimate uncollectible receivables by analyzing and classifying accounts receivable according to their age.