Question
Hercules Hair Restorer Inc. (HHRI) makes many varieties of hair restoration products which are sold under well-known marketing labels. A single batch contains 10,000 8
Hercules Hair Restorer Inc. (HHRI) makes many varieties of hair restoration products which are sold under well-known marketing labels. A single batch contains 10,000 8 oz. bottles and takes two days to make. Typically 15 batches are completed per month, for different brands. Basic cost data for the month of January appears below. Hair by Zeus Bottle Batch Cost per January's other expenses Oil, fl. oz. 2 $3 Supervision $8,000 Lotion, fl. oz. 4 $1 Indirect materials $2,200 Zeus potion, fl. oz. 1/4 $24 Equipment deprec & repairs $14,520 Alcemena scent 1/16 $48 Plant manager's salary $6,500 Bottle, cap, label 1 $0.4 Utilities $1,800 Direct labor, hour 50 $14 $33,020 Machine hours 8 Why is actual costing of overheads less accepted than normal costing? It is impossible to determine overheads per job until the end of the year Monthly allocation of actual overheads leads to unusually low or high product costs when monthly output differs from the annual average It exacerbates the problem of under/over applied overheads Actual costing is widely used in practice (a) and (b) only
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