Question
Cooper's Bags Company manufactures cloth grocery bags to be sold to grocery stores and other retailers. Cooper's Bags Company sells the bags in cases of
Cooper's Bags Company manufactures cloth grocery bags to be sold to grocery stores and other retailers. Cooper's Bags Company sells the bags in cases of 1,900 bags. The bags come in three sizes: Large, Medium, and Small. Currently, Cooper's Bags Company uses a single plantwide overhead rate to allocate its $8,988,000 annual manufacturing overhead. Of this amount, $2,170,000 is associated with the Large Bag line, $3,418,000 is associated with the Medium Bag line, and $3,400,000 is associated with the Small Bag line. Cooper's Bags Company is currently running a total of 44,000 machine hours: 13,600 in the Large Bag line, 15,600 in the Medium Bag line, and 14,800 in the Small Bag line. Cooper's Bags Company uses machine hours as the cost driver for manufacturing overhead costs.
Which product line(s) have been overcosted or undercosted by using the plantwide manufacturing overhead rate?
A. Large Bags has been overcosted; Medium and Small have been undercosted.
B. Large Bags has been undercosted; Medium and Small have been overcosted.
C. Large, Medium, and Small Bags have all been overcosted.
D. Large, Medium, and Small Bags have all been undercosted.
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