Reference: 17_01
Kudzu Company Sells Two Products Big X and Little

question 36

True/False

Reference: 17_01
Kudzu Company sells two products Big X and Little X. Current direct material and direct labor costs are detailed below. Next year, the company wishes to use a plantwide overhead rate with direct labor hours as its allocation base. Next year's overhead is estimated to be $525,000. The direct labor and direct materials costs are estimated to be consistent with the current year. Direct labor costs $20 per hour and the company expects to manufacture 16,000 units of Big X and 18,000 units of Little X next year.
$\begin{array}{|c|c|c|}\hline & \begin{array}{l}\text { Direct } \\\text { Material } \\\text { per Unit }\end{array} & \begin{array}{c}\text { Direct } \\\text { Labor Dollars } \\\text { per Unit }\end{array} \\\hline \operatorname{Big} X & \$5 & \$ 20 \\\hline \text { Little X } &\$3 & \$ 10 \\\hline\end{array}$

-Kudzu's plantwide overhead rate will be $21 per direct labor hour next year.

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Definitions:

Discounts

are reductions from the usual cost of something, often used to prompt sales or as a negotiation tactic.

Allowances

Discounts or financial concessions given to customers, employees, or distributors as an incentive or for defective goods.

Cumulative Quantity Discounts

Price reductions applied to purchases based on the accumulated quantity bought over a specific time period, incentivizing larger orders.

Noncumulative Quantity Discounts

Price reductions given for a single purchase order rather than over a period of time, based on the quantity of goods purchased.