Developing and Using a Predetermined Overhead Rate: High-Low
Cost Estimation
For years, Mattoon Components Company has used an actual plantwide
overhead rate and based its prices on cost plus a markup of 30
percent. Recently the marketing manager, Holly Adams, and the
production manager, Sue Walsh, confronted the controller with a
common problem. The marketing manager expressed a concern that
Mattoon's prices seem to vary widely throughout the year. According
to Adams, "It seems irrational to charge higher prices when...