QS 8-24 Overhead rate change P4 A company's returns department incurs annual overhead costs of $72,000 and budgets 2,000 returns per year. Management believes it has found a better way to package its products. As a result, the company expects to reduce the number of shipments that are returned due to damage by 5%. This is expected to reduce the department's annual overhead by $12,000. Compute the department's standard overhead rate per return (a) before the sustainability improvement and (b) after the sustainability improvement.

FINANCIAL ACCOUNTING
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Chapter1: Financial Statements And Business Decisions
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QS 8-24 Overhead rate change P4
A company's returns department incurs annual overhead costs of $72,000 and budgets 2,000 returns per year. Management believes it has
found a better way to package its products. As a result, the company expects to reduce the number of shipments that are returned due to
damage by 5%. This is expected to reduce the department's annual overhead by $12,000.
Compute the department's standard overhead rate per return (a) before the sustainability improvement and (b) after the sustainability
improvement.
Transcribed Image Text:QS 8-24 Overhead rate change P4 A company's returns department incurs annual overhead costs of $72,000 and budgets 2,000 returns per year. Management believes it has found a better way to package its products. As a result, the company expects to reduce the number of shipments that are returned due to damage by 5%. This is expected to reduce the department's annual overhead by $12,000. Compute the department's standard overhead rate per return (a) before the sustainability improvement and (b) after the sustainability improvement.
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