Velshi Printers Has Contracts to Complete Weekly Supplements Required by Forty-Six

question 26

Multiple Choice

Velshi Printers has contracts to complete weekly supplements required by forty-six customers.For the year 2015,manufacturing overhead cost estimates total $840,000 for an annual production capacity of 12 million pages. For 2015 Velshi Printers has decided to evaluate the use of additional cost pools.After analyzing manufacturing overhead costs,it was determined that number of design changes,setups,and inspections are the primary manufacturing overhead cost drivers.The following information was gathered during the analysis:
$$\begin{array} { l r r } \text { Cost pool } & \text { Manufacturing overhead costs } & \text { Activity level } \\\text { Design changes } & \$ 120,000 & 300 \text { design changes } \\\text { Setups } & 640,000 & 5,000 \text { setups } \\\text { Inspections } & \underline{80,000} & 8,000 \text { inspections } \\\text { Total manufacturing overhead costs } & \$ 840,000 &\end{array}$$ During 2015,two customers,Money Managers and Hospital Systems,are expected to use the following printing services:
$$\begin{array} { l r r } \text { Activity } & \text { Money Managers } & \text { Hospital Systems } \\\text { Pages } & 60,000 & 76,000 \\\text { Design changes } & 10 & 0 \\\text { Setups } & 20 & 10 \\\text { Inspections } & 30 & 38\end{array}$$ When costs are assigned using the single cost driver,number of pages printed,then ________.

• A) Velshi Printers will want to retain this highly profitable customer
• B) Money Managers will likely seek to do business with competitors
• C) Money Managers is unfairly over billed for its use of printing resources
• D) Money Managers is grossly under billed for the job, while other jobs will be unfairly over billed

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Definitions:

Prepackaged Form

Products or software sold in a ready-to-use condition, without the need for customization.

Vendor

A business or individual that sells goods or services.

Computer Hardware

The physical components of a computer system, such as the CPU, hard drive, RAM, and motherboard.

General Purpose

Designed to be suitable for a wide range of tasks rather than being specialized for any particular one.