Answer the Following Questions Using the Information Below:
Geelong Publishing

Answer the following questions using the information below:
Geelong Publishing has contracts to complete weekly supplements required by 46 customers.For the year 2018,manufacturing overhead cost estimates total $420 000 for an annual production capacity of 12 million pages.
For 2018,Geelong Publishing has decided to evaluate the use of additional cost pools.After analysing manufacturing overhead costs,it was determined that the number of design changes,set-ups and inspections are the primary manufacturing overhead cost drivers.The following information was gathered during the analysis:
$\begin{array} { l r r } \text { Cost Pool } & \text { Manufacturing Overhead Costs } & \text { Activity Level } \\ \text { Design changes } & \$ 60000 & 400 \text { design changes } \\ \text { Set-ups } & 320000 & 8000 \text { set-ups } \\ \text { Inspections } & 40000 & 8000 \text { inspections } \\ \text { Total manufacturing overhead costs } & \$ 420000 & \end{array}$

During 2018, two customers, Kidscare Books and Biodata Research, are expected to use the following printing services:

$\begin{array} { l r r } \text { Activity } & \text { Kid scare Books } & \text { Biodata Research } \\ \text { Pages } & 60000 & 76000 \\ \text { Design changes } & 10 & 0 \\ \text { Set-ups } & 20 & 10 \\ \text { Inspections } & 30 & 38 \end{array}$
-When costs are assigned using the single cost driver,number of pages printed,then:

A) Kidscare Books will likely seek to do business with competitors.
B) Kidscare Books is unfairly over-billed for its use of printing resources.
C) Kidscare Books is grossly under-billed for the job,while other jobs will be unfairly over-billed.
D) Geelong Publishing will want to retain this highly profitable customer.

Correct Answer:

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