Chapter 15, Problem 38P

1.

To determine

Describe the meaning of maximum capacity and describe the reason for it not to be a satisfactory basis for determining the fixed factory overhead application rate.

2.

To determine

Draft a revised variance report for Y M Company using a practical capacity as basis for determining the fixed factory overhead application rate.

3.

To determine

Determine the reported cost of good sold and the operating income for the six months.

4.

To determine

Mention the capacity level that the company must use to determine the factory overhead application rates.