The Ogden plant makes Beanie Babies, small stuffed toys in a variety of animal shapes. The toys
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The plant was designed two years ago for 180 production employees (direct labor), each work ing 2,000 hours per year. With the high demand for Beanie Babies, 240 production workers are projected for next year, each expected to work 2,200 hours per year. At the end of the year, based on the actual number of Beanie Babies produced, standard volume was 480,000 direct labor hours.
Required:
a. Calculate overhead rates using expected and normal volume. Round the overhead rates to two significant digits.
b. Calculate the volume variance for the year assuming expected volume is used in setting the overhead rate.
c. Calculate the volume variance for the year assuming normal volume is used in setting the overhead rate.
d. Write a short memo that non- accounting senior managers can understand interpreting why the volume variance in part (b) differs from the volume variance in part (c). In other words, why do the numbers in parts (b) and (c) differ and why is this difference relevant to the managers?
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Related Book For
Accounting for Decision Making and Control
ISBN: 978-0078025747
8th edition
Authors: Jerold Zimmerman
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