The Easton plant produces sheet metal chassis for flat- panel televisions. The chassis are man-ufactured on a
Question:
The following data summarize the flexible overhead budget:
At the end of the year, the following overhead amounts had been incurred:
Actual
Depreciation ........... $ 695,000
Indirect labor........... 71,288
Indirect materials........... 84,860
Property taxes........... 31,000
Utilities.............. 133,074
Other ............... 68,858
Total ................ $ 1,084,080
Any over- or underabsorbed overhead is written off to cost of goods sold. The ending finished goods inventory consists of 2,000 units of HX 3 and 1,000 units of DX 55, representing 13,400 minutes and 10,300 minutes of actual machine time, respectively.
Required:
(Round all dollars, including overhead rates, to two decimal places.)
a. Calculate the overhead absorption rate set at the start of the year.
b. Calculate the over- or underabsorbed overhead for the year.
c. The firm is considering switching to variable costing. What effect would this decision have on Eastons reported profit for this year? To implement variable costing at the end of the year, variable overhead is calculated as $ 3.00 per machine minute times the actual number of machine minutes. Fixed overhead is the difference between total actual over-head and variable overhead. d. Instead of defining fixed overhead as all overhead in excess of variable overhead as in part ( c ), assume the following: Fixed overhead is budgeted fixed overhead ($ 820,000), and variable overhead is the difference between total actual overhead and budgeted fixed over-head. What is the difference between absorption net income and variable costing income given these newassumptions?
Step by Step Answer:
Accounting for Decision Making and Control
ISBN: 978-0078025747
8th edition
Authors: Jerold Zimmerman