The State of Ohio Has Passed a Law Requiring That $\div$

question 134

Multiple Choice

The state of Ohio has passed a law requiring that every automobile be inspected at least once a year for pollution control.Anson Enterprises is considering entering into this type of business.After extensive studies,Mark Anson has developed the following set of projected annual data on which to make his decision: Anson believes that his company will inspect 100,000 automobiles per year.The company earns an average of 18.75 percent return on its assets.
-The price to be charged for inspecting each automobile using the gross margin pricing method would be calculated as

• A)($1,203,000.00 \(\div\) 100,000)+ [($1,203,000.00 \(\div\)100,000)× ($90,000 \(\div\)$1,203,000.00)].
• B)($1,203,000.00 \(\div\) 100,000)+ [($500,000 \(\div\) 100,000)× 0.1875].
• C)($913,000.00 \(\div\) 100,000)+ {($913,000.00 \(\div\) 100,000)´ [($90,000 + $290,000)\(\div\) $913,000.00]}.
• D)none of these options.

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Definitions:

Direct Materials Quantity Variance

The difference between the actual quantity of direct materials used and the expected quantity, multiplied by the standard cost per unit.

Direct Labor Rate Variance

The difference between the actual cost of direct labor and the standard cost, attributed to the difference in the hourly wage rate paid and the standard rate expected.

Direct Labor Costs

These are the salaries and wages paid to employees directly involved in producing a company's goods or services.

Controllable Variance

Controllable variance refers to the difference between actual and expected figures that can be influenced by the actions of managers.