Steele Company Uses a Predetermined Overhead Rate Based on Machine

question 2

Multiple Choice

Steele Company uses a predetermined overhead rate based on machine hours to apply manufacturing overhead to jobs. Steele Company has provided the following estimated costs for next year. $\begin{array}{lrr} \text { Direct materials. } &£ 20,000\\ \text { Direct Labour } &60,000\\ \text { Sales commissions } &80,000\\ \text {Salary of production supenisor } &40,000\\ \text { Indirect materials } &8,000\\ \text { Advertising expense } &16,000\\ \text { Rent on factory equipment } &20,000\end{array}$

Steele estimates that 10,000 direct Labour hours and 16,000 machine hours will be worked during the year. The predetermined overhead rate per hour will be:

• A)£4.25.
• B)£8.00.
• C)£9.00.
• D)£10.25.

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Definitions:

Specific Pricing Points

Pricing strategies where goods or services are sold at predetermined prices aimed at attracting certain segments of customers or fitting within certain budgets.

Incremental Revenue

The additional income generated from a new business activity or strategy, beyond the existing baseline revenue.

Incremental Cost

The additional cost incurred from producing one more unit of a product or service.

Advertising Campaign

A series of advertisement messages that share a single idea and theme which make up an integrated marketing communication (IMC). An advertising campaign is broadcasted through various media or channels over a specific time frame.