Collins Corporation Uses a Predetermined Overhead Rate Based on Direct

question 134

Multiple Choice

Collins Corporation uses a predetermined overhead rate based on direct labor cost to apply manufacturing overhead to jobs. The following information applies to the Corporation for the current year: The manufacturing overhead cost for the current year will be:

• A)$17,000 overapplied
• B)$17,000 underapplied
• C)$55,000 overapplied
• D)$55,000 underapplied

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Definitions:

Asset Turnover Ratio

A profitability ratio that measures how effectively a business is using its assets to generate sales, computed as sales divided by average total assets.

Long-Term Investments

Assets that a company intends to hold for more than a year, such as stocks, bonds, or real estate.

Fixed Assets

Long-term tangible assets used in the operation of a business and not expected to be converted into cash within one year, such as buildings, machinery, and equipment.

Long-Term Liabilities

Liabilities that will not be due for a long time (usually more than one year).