1. Manufacturing overhead is assigned to products based on number of machine hours required. In year when 20,000 machine hours were anticipated, costs were budgeted at $125,000. If product requires 7,000 machine hours, how much manufacturing overhead will be allocated to this product?
A) $41,667
B) $43,750
C) $1,120
D) $50,000
2. Jones Company manufactures widgets. Old Ham Company has approached Jones with proposal to sell company one of components utilized to make widgets at price of $100,000 for 50,000 units. Jones is presently making these components in its own factory. Following costs are associated with this part of process when 50,000 units are produced:
|
Direct material
|
$44,000
|
|
Direct labor
|
20,000
|
|
Manufacturing overhead
|
60,000
|
|
Total
|
$124,000
|
Manufacturing overhead consists of $32,000 of costs which will be eliminated if components are no longer produced by Jones. Remaining manufacturing overhead will continue whether or not Jones makes components.
Determine amount of avoidable costs if Jones purchases rather than makes components?
A) $60,000
B) $96,000
C) $124,000
D) $100,000