Louie's Music Co B) C) D)

question 28

Multiple Choice

Louie's Music Co.produces three types of harmonicas: the junior model,the standard model and the professional model.The junior model requires 8 setups,the standard model requires 12 setups and the professional model requires 20 setups.The company expects to incur overhead costs of $28,000 where the cost driver is machine setups.How much overhead is assigned to each product?

• A) \[\begin{array} { | c | c | c | }
• \hline \text { Junior Model } & \text { Standard Model } & \text { Professional Model } \\
• \hline \$ 9,333 & \$ 9,333 & \$ 9,334 \\
• \hline
• \end{array}\]
• B) \[\begin{array} { | c | c | c | }
• \hline \text { Junior Model } & \text { Standard Model } & \text { Professional Model } \\
• \hline \$ 7,000 & \$ 7,000 & \$ 14,000 \\
• \hline
• \end{array}\]
• C) \[\begin{array} { | c | c | c | }
• \hline \text { Junior Model } & \text { Standard Model } & \text { Professional Model } \\
• \hline \$ 5,600 & \$ 8,400 & \$ 14,000 \\
• \hline
• \end{array}\]
• D) \[\begin{array} { | c | c | c | }
• \hline \text { Junior Model } & \text { Standard Model } & \text { Professional Model } \\
• \hline \$ 3,500 & \$ 7,000 & \$ 17,500 \\
• \hline
• \end{array}\]

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Definitions:

Controlling Costs

The process of managing and regulating expenses in order to improve profitability without compromising quality or performance.

Merchandise Inventory Turnover

A measure of how many times a company’s inventory is sold and replaced over a specific period.

Inventory Management

The process of ordering, storing, and using a company's inventory, including raw materials, components, and finished products.

Periodic Inventory System

A method of inventory valuation wherein updates and cost of goods sold calculations are made at set intervals, not continuously.