SRS Educational Supply company had a very good year that ended Dec 31, 2017. In 2016,...

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SRS Educational Supply company had a very good year that ended Dec 31, 2017. In 2016, SRS applied 160% manufacturing overhead rate to allocate project overhead cost to direct manufacturing costs. This paid off in 2017 after writing off the overages in manufacturing overhead allocation costs. While it was able to pay off in 2017, there should be a serious consideration to bring this down in 2018 in order to have the allocation closer to the actual costs incurred. If they use the proration approach, they would offset the costs by percentage. This will deliver an overall more accurate result. The cost of goods sold will have less of a difference, which in turn will change the net income. With all of the information, it would not be wise outsourcing the pressing. They manufacture supplies for education, but most importantly they earn revenue through the stock books. If they outsource, they will lose their source of revenue. The company could also look at lab supplies and art supplies for job order costing. They could be managed through merchandise inventories SRS Educational Supply company had a very good year that ended Dec 31, 2017. In 2016, SRS applied 160% manufacturing overhead rate to allocate project overhead cost to direct manufacturing costs. This paid off in 2017 after writing off the overages in manufacturing overhead allocation costs. While it was able to pay off in 2017, there should be a serious consideration to bring this down in 2018 in order to have the allocation closer to the actual costs incurred. If they use the proration approach, they would offset the costs by percentage. This will deliver an overall more accurate result. The cost of goods sold will have less of a difference, which in turn will change the net income. With all of the information, it would not be wise outsourcing the pressing. They manufacture supplies for education, but most importantly they earn revenue through the stock books. If they outsource, they will lose their source of revenue. The company could also look at lab supplies and art supplies for job order costing. They could be managed through merchandise inventories

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Based on the information provided it seems that SRS Educational Supply company had a successful year in 2017 However there are considerations for impr... View the full answer