Let's suppose that you are making automobiles. In July there is a plant shutdown for two weeks. Factory labor, both direct (production line workers) and indirect (factory supervisor), take mandatory vacation during those two weeks. Explain, the mechanics of calculating a Predetermined Overhead Rate for this year. Which allocation base (or bases) may be used to apply overhead cost to the automobiles produced? Should the cost of the factory labor vacations be spread to all automobiles produced during the entire year? Would the cost of the vacations for the Sales and Human Resource departments also be allocated to the automobiles? What cost type of cost are these as compared to the factory worker vacation costs? How do vacation costs for Sales and HR departments flow through the Income Statement?
Let's suppose that you are making automobiles. In July there is a plant shutdown for two weeks. Factory labor, both direct (production line workers) and indirect (factory supervisor), take mandatory vacation during those two weeks.
Explain, the mechanics of calculating a Predetermined
Would the cost of the vacations for the Sales and Human Resource departments also be allocated to the automobiles? What cost type of cost are these as compared to the factory worker vacation costs? How do vacation costs for Sales and HR departments flow through the Income Statement?
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