Assume That Calamar Corp

question 83

Multiple Choice

Assume that Calamar Corp. has sales of $7.5 million and accounts payable of $450,000. The corporation utilizes the percent-of-sales method of financial forecasting. If Calamar is expected to generate sales of $9 million next year, what will the firm's accounts payable be?

• A) $540,000
• B) $450,000
• C) $405,000
• D) None of the above

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Definitions:

Production Department

A division or area within a company where the manufacture of products or goods takes place.

Variable Overhead Rate

The cost per unit of varying overhead expenses that change with the level of production activity.

Fixed Manufacturing Overhead

The portion of manufacturing overhead costs that do not vary with the level of production.

Predetermined Overhead Rate

This rate is used to allocate manufacturing overhead to individual units produced, based on a predetermined formula.