When selecting a volume-based cost driver, the goal is to:
A. choose an input that varies in a pattern that is most similar to the pattern with which overhead costs vary.
B. eliminate complexity by using a plantwide overhead rate for all of a firm's products.
C. choose labor hours for a computer-integrated manufacturing processes.
D. choose a period where a cost driver is at a low level so that overhead costs will be at a low level.
E. None of these are goals when selecting a volume-based cost driver.
Answer: A
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Whidbey Co. fixed budget for the year is shown below:Sales (50,000 units) …………………………?$1,300,000Cost of goods sold:?? Direct materials …………………………$150,000? Direct labor ………………………………450,000? Overhead (includes $2 per unit variableoverhead) …………………………………… 240,000 840,000 Gross profit ………………………………?$ 460,000Selling expenses:?? Sales commissions (all variable) …………60,000? Rent (all fixed) ……………………………40,000? Insurance (all fixed) ………………………35,000?General and administrative expenses:?? Salaries (all fixed) ………………………72,000? Rent (all fixed)
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