BRIEFLY explain why reducing the estimated machine hours in the base for the pre
ID: 2544993 • Letter: B
Question
BRIEFLY explain why reducing the estimated machine hours in the base for the predetermined overhead rate results in a large increase of the net operating income at the end of the fiscal year? (Include discussion about how how such a change affects the rate, and what happens to product costs if that rate is applied throughout the year, and any adjustment needed at the end of the fiscal year, and then use this information in your explanation.)
2. BRIEFLY explain why you should or should not comply with the manager’s request? (Your response should recognize and explain an ethical dilemma.)
Explanation / Answer
As per Chegg policy, I am answering the first question.
1. Reduction of the machine hours in the base for predetermined overhead rate will inflate the overhead recovery rate.An increase in overhead rate will increase the overheads applied. The over applied overheads will be closed out to the Cost of goods Sold. As such this will inflate the net income or profit for the period under consideration.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.