Use the Information Below to Answer the Following Question(s)

question 165

Multiple Choice

Use the information below to answer the following question(s) :
Green Bags Company manufactures cloth grocery bags to be sold to grocery stores and other retailers. Green Bags Company sells the bags in cases of 1,000 bags. The bags come in three sizes: Large, Medium, and Small. Currently, Green Bags Company uses a single plantwide overhead rate to allocate its $7,141,100 of annual manufacturing overhead. Of this amount, $1,875,000 is associated with the Large Bag line, $2,992,500 is associated with the Medium Bag line, and $2,273,600 is associated with the Small Bag line. Green Bags Company is currently running a total of 37,000 machine hours; 12,500 in the Large Bag line, 13,300 in the Medium Bag line, and 11,200 in the Small Bag line. Green Bags Company uses machine hours as the cost driver for manufacturing overhead costs.
-Which product line(s) at Green Bags Company have been overcosted or undercosted by using the plantwide manufacturing overhead rate?

• A) Large Bags has been overcosted; Medium and Small have been undercosted.
• B) Large, Medium, and Small Bags have all been overcosted.
• C) Large, Medium, and Small Bags have all been undercosted.
• D) Large Bags has been undercosted; Medium and Small have been overcosted.

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