Magnum Company Uses Direct Labor Cost as a Basis for Computing

question 62

Multiple Choice

Magnum Company uses direct labor cost as a basis for computing its predetermined overhead rate.In computing the predetermined overhead rate for 2016,the company misclassified a portion of direct labor cost as indirect labor.The effect of this misclassification will be to:

• A) understate the predetermined overhead rate.
• B) overstate the predetermined overhead rate.
• C) there will be no effect on the predetermined overhead rate.
• D) Can't tell from the information provideD.
• Misclassifying the direct labor will cause the numerator to be larger and the denominator to be smaller,thus overstating the rate.

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Definitions:

Tangible Rewards

Physical or material rewards given as recognition for an individual's accomplishments or desirable behavior.

Appreciation Expressed

The act of acknowledging or showing gratitude for efforts, achievements, or qualities.

Project Milestones

Key events or achievements that mark significant progress in a project.

Revising Major Decisions

The process of reviewing and potentially altering significant choices previously made in light of new information or changes in circumstances.