Answer the Following Questions Using the Information Below:
Velshi Printers

question 93

Multiple Choice

Answer the following questions using the information below:
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:
$$\begin{array} { l r r } \text { Cost pool } & \text { Manufacturing overhead costs } & \text { Activity level } \\\text { Design changes } & \$ 120,000 & 300 \text { design changes } \\\text { Setups } & 640,000 & 5,000 \text { setups } \\\text { Inspections } & 80,000 & 8,000 \text { inspections } \\\text { Total manufacturing overhead costs } & \$ 840,000 &\end{array}$$ During 2015, two customers, Money Managers and Hospital Systems, are expected to use the following printing services:
$$\begin{array} { l r r } \text { Activity } & \text { Money Managers } & \text { Hospital Systems } \\\text { Pages } & 60,000 & 76,000 \\\text { Design changes } & 10 & 0 \\\text { Setups } & 20 & 10 \\\text { Inspections } & 30 & 38\end{array}$$
-Using pages printed as the only overhead cost driver,what is the manufacturing overhead cost estimate for Money Managers during 2015?

• A) $5,000
• B) $3,500
• C) $4,200
• D) $6,000

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Definitions:

Manufacturer's Or Dealer's Profit

The profit margin that a manufacturer or dealer earns from producing or selling goods, typically calculated as the difference between the cost of production and the sale price.

Residual Value

The estimated value an asset will realize upon the conclusion of its useful life, considered in depreciation calculations.

Operating Lease Method

An accounting method for leasing whereby the lease payments are treated as an operational expense, without recording the asset and liability on the balance sheet.

Straight-Line Depreciation

An approach that spreads the expense of a physical asset across its productive lifespan in consistent yearly increments.