A manufacturing company uses direct labour cost as a basis for determining its predetermined overhead recovery rate. In
calculating the predetermined overhead recovery rate for the past year, the company misclassified a portion of direct labour
cost as indirect labour cost. This misclassification will …
a. It is impossible to tell if there will be any effect, based on the information provided.
b. have no effect on the predetermined overhead recovery rate
c. overstate the predetermined overhead recovery rate.
d. understate the predetermined overhead recovery rate.
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Question 2
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Over-application (over-recovery) of production overheads means that the …
a. budgeted overhead cost was less than the actual overhead cost.
b. applied overhead cost was less than the actual overhead cost.
c. budgeted overhead cost was less than the applied overhead cost.
d. applied overhead cost was greater than the actual overhead cost.
Assuming that all variables remain constant, an increase in variable cost per unit will ...
a. Increase contribution
b. Decrease fixed cost
c. Decrease profit
d.
Change nothing
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Question 9
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A perpetual inventory system is a system for ...
a. ensuring that inventory-taking procedures will satisfy the auditors.
b. recording all transactions in the storage department on a continuous basis.
c. checking inventory on the same date in each accounting period.
d. checking physical inventory against bin card information on a continuous basis.
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Question 10
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Smell-Good (Pty) Ltd manufactured and sold 1 000 units of body perfumes. The company incurred fixed costs of R50 000
and made a profit of R30 000 from sales. What is the contribution per unit?
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