Question

The Northwoods Manufacturing Company has automated its production facilities dramatically during the last five years, to the extent that the number of direct-labor hours has remained steady, while production has increased fivefold. Automated equipment, such as robots, has helped increase productivity. Overhead, previously applied at the rate of $7.50 per direct-labor hour, is now being applied at the rate of $23.50 per direct-labor hour. Explain how an auditor might evaluate the reasonableness of the application of factory overhead to year-end inventory and cost of goods sold.



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  • CreatedSeptember 22, 2014
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