A Company Has Three Products (X, Y, and Z) That

question 158

Multiple Choice

A company has three products (X, Y, and Z) that it sells, packs, and ships to its customers. Because the products have different sizes they also have different packing and shipping costs so we will use a new measure-a packing/shipping unit. Because Product Y is the smallest of the three products, we will assign it a value of 1 packing/shipping unit. Product X is twice as big as Product Y and Product Z is four times as big as Product Y. If, on a monthly basis, this company sells an average of 1,500 units of Product X, 800 units of Product Y, and 60 units of Product Z, how many packing/shipping units should it allocate to Product Z per month (to the nearest whole number) ?

• A) 240
• B) 424
• C) 620
• D) 800
• E) 3,000

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Definitions:

Predetermined Overhead Rate

A rate used to apply manufacturing overhead to products or job orders, calculated before the production process begins.

Job-Order Costing

An accounting methodology used to assign costs to specific jobs or batches, enabling the calculation of profitability per job.

Machine-Hours

A measure of production time, calculated by multiplying the number of machines by the hours they are in operation.

Predetermined Overhead Rate

The rate calculated prior to the accounting period that is used to apply overhead costs to products or job orders, based on estimated costs and activity levels.