Question

In: Accounting

Chapter 19 2.) How is the predetermined overhead allocation rate used to allocate overhead? 4.) Why...

Chapter 19

2.) How is the predetermined overhead allocation rate used to allocate overhead?

4.) Why is using a single plantwide overhead allocation rate not always accurate?

6.) What is activity-based management? How is it different from activity-based costing?

8.) What are the four steps to developing an activity-based costing system?

10.) List two ways managers can use ABM to make decisions.

12.) Explain the difference between target price and target cost.

14.) What is a just in time management system?

16.) What are the inventory accounts used in JIT costing?

18.) Why is JIT costing sometimes called backflush costing?

20.) What is the purpose of quality management systems?

22.) “Prevention is much cheaper than external failure.” Do you agree with this statement? Why or why not?

24.) Why are some quality costs hard to measure?

Expert Solution

2) Predetermined overhead allocation is mainly used to manufacturing overhead to product or job orders and it is calculated by the beginning of the period. The formula is that,Estimated manufacturing overhead cost divided by estimated units in the total allocation base. Some of the exampiles are direct material, direct labour hours and machine hours.

For exampile- Abc company uses direct labour hours to assign manufacturing overhed cost to job orders. The budget of the Abc company shows an estimated overhead cost of 16000 for the forthcoming year. The company estimates that 2000 direct labour hours will be worked in the forthcoming year.

So this can be ascertained by =Estimated manufacturing overhead cost/estimated units in the total allocation base

that is 16000/2000=8 per direct labor hour.

Simply it is based on an estimation. At the end of the period difference will be measured such a difference

is eliminated , the eliminated difference is called over or under applied overhead.

ekkarill92 answered 1 year ago

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