1. Assume that you are an accountant for a manufacturing firm. At the end of one year, there is a large overapplied overhead amount. How would you explain to management why this balance might exist?
2. The president of a fairly large manufacturing company suggests that it would be more efficient to discontinue the job of storeroom clerk and to let factory workers enter the storeroom and select their own materials. Comment on this suggestion.
3. Why should management insist that a physical inventory be taken once a year even though perpetual inventory records are kept?
4. From an administrative standpoint, why is direct labor cost a simple basis to use for the application of manufacturing overhead?
5. In general, would managers prefer to see overapplied or underapplied overhead? Why?