ME 491 Engineering Economy & Management Unit 6: Financial Ratio Analysis

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Questions and Answers

What is the overhead rate for Machine 1 based on?

  • Material cost
  • Estimated activity level
  • Labour hours
  • Labour cost (correct)

How is the overhead rate for Machine 2 determined?

  • Labour hours (correct)
  • Estimated activity level
  • Labour cost
  • Material cost

Which cost source is considered for determining the overhead rate for Machine 3?

  • Labour cost
  • Estimated activity level
  • Material cost (correct)
  • Labour hours

What is the impact of each dollar spent on direct labour cost for Machine 1?

<p>$0.50 in factory expense added to the product cost (C)</p> Signup and view all the answers

How much factory expense is added to the product cost for each dollar spent on direct labour cost for Machine 2?

<p>$0.75 (C)</p> Signup and view all the answers

Which of the following is a component of annual operating costs?

<p>Overhead allocated to an asset (B)</p> Signup and view all the answers

What is the purpose of determining the overhead rates and collecting data?

<p>To actually determine the cost of production (D)</p> Signup and view all the answers

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