To Maximize Profits, What Product and How Many Units Should

question 224

Multiple Choice

To maximize profits, what product and how many units should Kitchen Appliances Company produce in a month?

• A) 2,400 bread machines and 0 toaster ovens
• B) 630 toaster ovens and 200 bread machines
• C) 3,600 toaster ovens and 2,400 bread machines
• D) 3,600 toaster ovens and 0 bread machines

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Definitions:

Machine-hours

A measure of the time that machines are operating, often used as a basis for allocating manufacturing overhead costs.

Direct Materials Cost

The cost of raw materials and components that are directly used in the production of a product.

Direct Labor-hours

Direct labor-hours are the total time workers spend on producing a particular unit of goods or services.

Predetermined Overhead Rate

An estimated rate used to allocate manufacturing overhead costs to individual units of production based on a certain activity base, such as labor hours or machine hours.