The Xiang Plant Has Two Categories of Overhead: Maintenance and Inspection

question 61

Multiple Choice

The Xiang plant has two categories of overhead: maintenance and inspection. Costs expected for these categories for the coming year are as follows:
The plant currently applies overhead using direct labour hours and expected capacity of 50,000 direct labour hours. The following data have been assembled for use in developing a bid for a proposed job:
Total expected machine hours for all jobs during the year is 25,000, and the total expected number of inspections is 1,500.
Using activity-based costing and the appropriate activity drivers, the total cost of the potential job would be

• A) £1,200.
• B) £1,800.
• C) £3,700.
• D) £3,875.

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Definitions:

Plantwide Factory Overhead Rate

A single overhead absorption rate used throughout a manufacturing facility to allocate indirect costs to products.

Overhead

Overhead refers to ongoing business expenses not directly attributed to the production of goods or services, such as rent, utilities, and administrative costs.

Production Department

The division of a business focused on the creation and manufacture of goods.

Manufacturing Processes

A series of steps or operations used to transform raw materials into finished goods through physical, chemical, or mechanical measures.