Danforth Manufacturing Company Uses a Cost-Plus Pricing Strategy

question 143

Multiple Choice

Danforth Manufacturing Company uses a cost-plus pricing strategy.At the beginning of the year,Danforth estimated that total annual fixed overhead costs would amount to $60,000.Further,Danforth estimated that the annual volume of production would be 1,000 units of product.Based on these estimates,Danforth computed a predetermined overhead rate that was used to allocate overhead cost to the products made throughout the year.As predicted,the actual volume of production amounted to 1,000 units of product.However,actual fixed overhead costs amounted to $56,000.Based on this information alone:

• A) a lower than appropriate selling price was assigned to products during the year.
• B) a higher than appropriate selling price was assigned to products during the year.
• C) the correct selling price was assigned to products during the year.
• D) the answer cannot be determined from the information provided.

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Definitions:

Entrust

To give someone the responsibility of taking care or managing something with confidence in their integrity and ability.

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Officers

Individuals appointed to manage the day-to-day operations of a corporation, typically holding positions like CEO, CFO, or COO.

Cause of Action

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