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Requirements: 1. Briefly explain why management should not base its decision to cease operations on financial statements based on actual costing. 2. Briefly explain the
Requirements: 1. Briefly explain why management should not base its decision to cease operations on financial statements based on actual costing. 2. Briefly explain the differences between using an actual versus a standard costing system, and why the latter is more informative for controlling operations during the year. 3. Assuming that the total over/underapplied overhead is only closed at the end of the year, briefly explain why the quarterly operating incomes under standard costing do not add up to the operating income for the year. 4. Based on the standard costing income statement, calculate the individual variances (for each quarter) for variable and fixed factory overhead. This should include the spending and efficiency variances for variable overhead, and the budget and volume variances for fixed overhead. 5. Briefly define, explain, and interpret each of the variances you calculated in # 5. 6. Provide recommendations (along with brief explanations) for management with regards to: a. Which variances deserve further investigation b. Whether or not to cease operations for the first two quarters
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