Brake Systems, Inc. (BSI), makes brake rotors that it sells to automobile manufacturers. The average materials cost
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a. Explain how the overapplied overhead affects the determination of year-end net income.
b. Assume that Ms. Jenkins used 280,000 rotors as the estimated sales to calculate the predetermined overhead rate. Determine the difference in expected cost per rotor she calculated and the cost per rotor that would result if the marketing department’s estimate (300,000 units) had been used.
c. Assuming that BSI uses a cost-plus pricing policy, speculate how Ms. Jenkins’ behavior could be contributing to the decline in sales.
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Related Book For
Fundamental Managerial Accounting Concepts
ISBN: 978-0078025655
7th edition
Authors: Thomas Edmonds, Christopher Edmonds, Bor Yi Tsay, Philip Old
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