CHAPTER 3 Predetermined Overhead Rates‚ Flexible Budgets‚ and Absorption/Variable Costing Questions 1. Although both variable and mixed costs change in total with activity measure changes‚ the difference is that variable costs change in direct proportion to such activity changes and mixed costs do not. Since a mixed cost has both a fixed and variable component‚ the cost per unit at different activity levels is not constant as it is with a variable cost. 2. No‚ these are not always the best points
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Ethics; Predetermined Overhead Rate and Capacity Pat Miranda‚ the new controller of Vault Hard Drives‚ Inc.‚ has just returned from a seminar on the choice of the activity level in the predetermined overhead rate. Even though the subject did not sound exciting at first‚ she found that there were some important ideas presented that should get a hearing at her company. After returning from the seminar‚ she arranged a meeting with the production manager‚ J. Stevens‚ and the assistant production manager
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machine hours as the cost driver to assign overhead costs to the air conditioners. The company has used a company-wide predetermined overhead rate in past years‚ but the new controller‚ Bennie Leon‚ is considering the use of departmental overhead rates beginning with the next year. The following planning information is available for the next year for each the four manufacturing departments within the company: Overhead Machine
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Problem 1 Brentwood Associates uses a job-order costing system and applies overhead on the basis of direct labor hours. At the beginning of the year‚ management estimated that 26‚000 direct labor hours would be worked and $1‚300‚000 of manufacturing overhead costs would be incurred. During the year‚ the company actually worked 24‚000 direct labor hours and incurred the following manufacturing costs: Direct materials used in production $1‚240‚000 Direct labor 1‚800‚000 Indirect labor 280‚000 Indirect
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Bridgeton Assignment 1. The overhead allocation rate used in the 1987 model year strategy study at the Automotive Component & Fabrication Plant (ACF) was 435% of direct labor dollar cost. Calculate the overhead allocation rate using the 1987 model year budget. Why do you get different numbers? 2. Calculate the overhead allocation rate for each of the model years 1988 through 1990. Are the changes since 1987 in overhead allocation rates significant? Why have these changes occurred? 3
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Manufacturing Overhead Name Institution Manufacturing Overhead Manufacturing overhead costs play a vital role in determining final cost of the product. Manufacturing overhead represents all the costs that the company incurs indirectly and not related to the cost of direct labor‚ direct materials or direct cost of machines (Donald‚ 2010). In short‚ companies are not able to trace these costs to individual items during the manufacturing process. Examples of overhead costs
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Departmental Overhead Rates; Underapplied or Overapplied Overhead 1. a. Predetermined Overhead rate= Estimated total manufacturing overhead costs Estimated total amount of allocation base | = $1‚440‚000 = 160% of direct labor costs $900‚000 direct labor costs | b. Hastings Job Direct Labor -Allocation Base × Plantwide Overhead Rate
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1. A company uses a predetermined overhead recovery rate based on machine hours. Budgeted factory overhead for a year amounted to £720 000‚ but actual factory overhead incurred was £738 000. During the year‚ the company absorbed £714 000 of factory overhead on 119 000 actual machine hours. What was the company’s budgeted level of machine hours for the year? A 116098 B 119000
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THE BUSINESS SITUATION Greetings Inc. has operated for many years as a nationally recognized retailer of greeting cards and small gift items. It has 1‚500 stores throughout the United States located in high-traffic malls. As the stock price of many other companies soared‚ Greetings’ stock price remained flat. As a result of a heated 2007 shareholders’ meeting‚ the president of Greetings‚ Robert Burns‚ came under pressure from shareholders to grow Greetings’ stock value. As a consequence
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A woman arrives at a crossroads. Will a predetermined fate cause her to take a certain path‚ or does she have free will to choose a different path? Who is to say? However‚ based on the nonfiction works The Sports Gene‚ written by David Epstein‚ and “Losing Control‚” a person’s fate is the result of choices that that person or people nearby the person have made. In “Losing Control‚” it is said that prior research or preparation affects one’s fate. David Epstein said in The Sports Gene that people
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