Essay about Accounting

761 Words Nov 28th, 2013 4 Pages
CASE 1: CASES FOR MANAGEMENT DECISION MAKING

1. Define and explain the meaning of a predetermined manufacturing overhead rate that is applied in a job-order costing system.

This is the estimate of how much overhead will be needed based on estimate of production.

2. What are the advantages and disadvantages of using the cost of each print as a manufacturing overhead cost driver?

Advantage Disadvantage Costs will be more accurate, costs are Relies too heavily on prediction of how many tailored more too specific products. of each particular product will be sold.

3. Using the information on the next page, compute and interpret the predetermined manufacturing overhead rate for Wall Décor. Total cost = number of prints x cost per
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a) How much of the total overhead cost is expected to be allocated to unframed prints? b) How much of the total overhead cost is expected to be allocated to steel framed prints? c) How much of the total overhead cost is expected to be allocated to wood framed prints? d) What percentage of the total overhead cost is expected to be allocated to unframed prints?

Total Overhead Cost = Manufacturing Overhead x number of units expected

Total Overhead Cost Unframed Prints Steel Framed, No Matting Wood Framed, with Matting $3.36 x 80,000 = $268,800 $4.48 x 15,000 = $67,200 $5.60 x 7,000 = $39,200

Percentage of manufacturing Overhead of Unframed prints to Allocated manufacturing Overhead = Manufacturing for Unframed Prints ×100% Allocated Manufacturing Overhead 3|Page

=

268,800 × 100% = 71.6% 375, 200

6. Do you think the amount of overhead allocated to the three product categories is reasonable? Relate your response to this question to your findings in previous questions.

No. There is more overhead allocated to the unframed prints than for the other prints that require more labor and materials. They will have under applied manufacturing overhead if they sell more framed and /

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