Question

Consider the information given on two products and their activity usage: Laser Printer Inkjet Printer Units produced 1,000 4,000 Setup hours 800 400 Inspection hours 500 500 Machine hours 200 1,000 Suppose that machine hours are used to assign all overhead costs to the two products. Select the best answer from the following:

A.Laser printers are overcosted, and inkjet printers are undercosted.
B.Laser printers and inkjet printers are accurately costed.
C.Laser printers are undercosted, and inkjet printers are overcosted.
D.Using inspection hours to assign overhead costs is the most accurate approach.
E.None of these.

Answer 1

C.Laser printers are under-costed, and inkjet printers are over-costed.

Step-by-step explanation:

Based on the machine hours concept, the overhead costs are allocation according to the machine hours between two products namely laser printer, and inkjet printer.

Since the allocation is done based on machine hours so we concentrate on the machine hours only.

So, by going through the information which is given in the question, we have reached the conclusion that the laser printer is under cost, and inkjet printers are over coasted because laser printer has only 200 machine hours whereas inkjet printer has 1,000 machine hours.