Scholes Manufacturing Corporation Has a Traditional Costing System in Which

question 11

Multiple Choice

Scholes Manufacturing Corporation has a traditional costing system in which it applies manufacturing overhead to its products using a predetermined overhead rate based on direct labor-hours (DLHs) . The company has two products, L45Y and F91I, about which it has provided the following data: The company's estimated total manufacturing overhead for the year is $3,170,400 and the company's estimated total direct labor-hours for the year is 60,000.

The company is considering using a variation of activity-based costing to determine its unit product costs for external reports. Data for this proposed activity-based costing system appear below:

-The unit product cost of product L45Y under the company's traditional costing system is closest to:

• A)$54.20
• B)$73.27
• C)$64.25
• D)$31.00

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Definitions:

Risk-Averse

The characteristic of preferring to avoid risk, opting for lower but more certain returns over potential higher but uncertain returns.

Probability

A measure of the likelihood that an event will occur, expressed as a number between 0 and 1, where 0 indicates impossibility and 1 indicates certainty.

Marginal Utility Curve

A graphical representation showing how marginal utility depends on the quantity of the good or service consumed.

Risk Aversion

The tendency of individuals to prefer outcomes that are certain or less risky over outcomes that are uncertain, even if the uncertain outcomes might offer a greater expected return.