Predetermined Overhead Rats As an isssitaist cost accountant for Firewall Industries, you have been assigned to review the activity base for the predetermined factory overhead rate. The president, Jolo Gunn, is concerned about the wide fluctuation in the amourit of over-or underapplied overhead in recentyears. Ayanalysis of the company's operationsand use of the current overhead rate (direct labor cost) has horrowed the possible alternative overhead babes to direct labor cost and machine bours. For the past Kye years, the following data have been gathered: 1. con Would hawe been detesa Ave yean to the total aswerd using the total aictipl ampount or hactory owerhead for the paut 2. For eich or the pant fiveyeans thelermine the two ierietrmined onethent rater developed ut 1. sietect a preilezernuited orertiesd rite mat ithe Requirement 1: Compute a predetermined factory overhead rate for each altemative base. Requirement 2: For each of the past five years, determine the over- or underapplied overhead, based on the two predetermined overhead rates developed in (1). Actual overheas Aeplied overheas (Ower) Under applied overhese Requirement 3: Select a predelermined overhead rate that the company ahould use and discuss the basis for your recommendation 1. Compute a predetermined factory overhead rate for each alternative base, assuming that rates would have been determined using the total actual amount of factory overhead for the past five years to the total associated activity base for the same five-year period. ( 25 points) 2. For each of the past five years, determine the over- or underapplied overhequd jbased on the two predetermined overhead rates developed in (11. 150 points) 3. Select a predetermined overhead rate that the company should use. and discuss the basis for your recommendation. (25 points) Predetermined Overhead Rats As an isssitaist cost accountant for Firewall Industries, you have been assigned to review the activity base for the predetermined factory overhead rate. The president, Jolo Gunn, is concerned about the wide fluctuation in the amourit of over-or underapplied overhead in recentyears. Ayanalysis of the company's operationsand use of the current overhead rate (direct labor cost) has horrowed the possible alternative overhead babes to direct labor cost and machine bours. For the past Kye years, the following data have been gathered: 1. con Would hawe been detesa Ave yean to the total aswerd using the total aictipl ampount or hactory owerhead for the paut 2. For eich or the pant fiveyeans thelermine the two ierietrmined onethent rater developed ut 1. sietect a preilezernuited orertiesd rite mat ithe Requirement 1: Compute a predetermined factory overhead rate for each altemative base. Requirement 2: For each of the past five years, determine the over- or underapplied overhead, based on the two predetermined overhead rates developed in (1). Actual overheas Aeplied overheas (Ower) Under applied overhese Requirement 3: Select a predelermined overhead rate that the company ahould use and discuss the basis for your recommendation 1. Compute a predetermined factory overhead rate for each alternative base, assuming that rates would have been determined using the total actual amount of factory overhead for the past five years to the total associated activity base for the same five-year period. ( 25 points) 2. For each of the past five years, determine the over- or underapplied overhequd jbased on the two predetermined overhead rates developed in (11. 150 points) 3. Select a predetermined overhead rate that the company should use. and discuss the basis for your recommendation. (25 points)
