Austin Company Uses a Job Order Cost Accounting System

question 7

Multiple Choice

Austin Company uses a job order cost accounting system. The company's executives estimated that direct labor would be $2,000,000 (200,000 hours at $10/hour) and that factory overhead would be $1,500,000 for the current period. At the end of the period, the records show that there had been 180,000 hours of direct labor and $1,200,000 of actual overhead costs. Using direct labor hours as a base, what was the predetermined overhead allocation rate?

• A) $6.00 per direct labor hour.
• B) $7.50 per direct labor hour.
• C) $6.67 per direct labor hour.
• D) $8.33 per direct labor hour.
• E) $7.08 per direct labor hour.

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Definitions:

Maturity Matching

The idea that the maturity of financing should match the duration of the project being financed.

Financing

The process of providing funds for business activities, making purchases, or investing.

Term

In finance, refers to the length of time until a financial contract expires. In other contexts, it can mean a specific period or duration.

Secondary Capital Market

The financial market where investors buy and sell securities they already own, as opposed to the primary market where securities are issued for the first time.