The Direct Labor Time Required to Produce the First Sailboat

question 22

Multiple Choice

The direct labor time required to produce the first sailboat of a particular model was 3,000 hours.If the company believes that an 80% learning curve applies to the production of this model sailboat,then the direct labor time required to produce the second boat is estimated to be

• A)600 hours.
• B)2,400 hours.
• C)3,600 hours.
• D)4,000 hours.

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Definitions:

Activity-Based Costing

A costing methodology that assigns overhead costs to products based on their consumption of activities.

Machine-Hours

A measure of production or work time, referring to the total hours a machine is operated in the performance of its tasks.

Overhead Cost

Indirect costs related to the general operation of a business and not directly tied to a specific product or service.

Activity-Based Costing

A costing method that assigns overhead and indirect costs to specific activities, providing a more accurate reflection of the resources consumed to produce a product or service.