Polson Pool Company is involved in a number of competitive bidding situations. The following costs are anticipated for a project to be bid for Terrance Manufacturing:

Which of these costs would be treated differently if Polson had either excess capacity or no excess capacity?
A) Direct materials used, $680,000.
B) Direct labor, $2,450,000.
C) Allocated variable overhead, $570,000.
D) Allocated fixed cost, $230,000.
E) None of these, as all four costs are considered in both situations.

Question

Polson Pool Company is involved in a number of competitive bidding situations. The following costs are anticipated for a project to be bid for Terrance Manufacturing:

Which of these costs would be treated differently if Polson had either excess capacity or no excess capacity?
A) Direct materials used, $680,000. 
B) Direct labor, $2,450,000. 
C) Allocated variable overhead, $570,000. 
D) Allocated fixed cost, $230,000. 
E) None of these, as all four costs are considered in both situations.

Quizplus · Accepted Answer

The Answer of Polson Pool Company is involved in a number of competitive bidding situations. The following costs are anticipated for a project to be bid for Terrance Manufacturing:

Which of these costs would be treated differently if Polson had either excess capacity or no excess capacity?
A) Direct materials used, $680,000. 
B) Direct labor, $2,450,000. 
C) Allocated variable overhead, $570,000. 
D) Allocated fixed cost, $230,000. 
E) None of these, as all four costs are considered in both situations.

Polson Pool Company Is Involved in a Number of Competitive