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

question 163

Multiple Choice

Use the information below to answer the following question(s) :
Martin Corporation manufactures two products-Plows and Harrows. The annual production and sales of Plows is 1,000 units, while 2,000 units of Harrows are produced and sold. The company has traditionally used direct labour hours to allocate its overhead to products. Plows require 5.0 direct labour hours per unit, while Harrows require 2.0 direct labour hours per unit. The total estimated overhead for the period is $603,500. The company is looking at the possibility of changing to an activity-based costing system for its products. If the company used an activity-based costing system, it would have the following three activity cost pools:
Expected Activity

-The overhead cost per Harrow using the traditional costing system would be closest to

• A) $86.40.
• B) $120.60.
• C) $402.34.
• D) $134.12.

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Definitions:

Competitive Firm

is a business that operates in a market where it has to compete with other firms for customers and cannot influence market prices.

Economic Profit

The surplus obtained from total revenues minus both explicit (out-of-pocket) and implicit (opportunity) costs of all resources employed.

Competitive Firm

A company that operates in a market with many buyers and sellers, where no single entity can influence prices on its own.

Optimal Output

The level of production that maximizes a firm's profit, determined by the point where marginal cost equals marginal revenue.