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The management wants a report on how a 155% manufacturing overhead charge in the internal accounting had looked compared to ABC (activity-based manufacturing overhead charge).
The management wants a report on how a 155% manufacturing overhead charge in the internal accounting had looked compared to ABC (activity-based manufacturing overhead charge). That is, how is the total cost of orders 9, 10 and 11 affected. Show on the spreadsheet a list of all three orders. Enter total cost with activity-based manufacturing overhead and total cost with 155% manufacturing overhead. Which internal accounting model do you think is best for the company? Motivate your answer. Just like many other companies, the management has had many discussions about how the indirect costs should be handled. Now the management has made the decision that the indirect manufacturing costs are to be distributed on work orders with the direct working time as the order base. The budgeted hourly wage for production is SEK 300 per hour. Last year, 155% of the budgeted hourly wage was used as manufacturing overhead. But now they want activity-based costing to be applied for the manufacturing overhead charge. Total manufacturing costs are SEK 5,880,000 and the total manufacturing capacity is 12,000 hours. The budgeted sales and administration overhead surcharge is 25%. The company has decided to report with budgeted prices for sawn timber and direct wages, as well as to use budgeted mark-up rates when reporting overhead mark-ups. Budgeted purchase price for timber SEK 2.6 per kg The production takes place after an order from the customer, i.e. against order. The order is then stored awaiting delivery. Indirect costs that are common to the departments are reported, for example, on account 490 and distributed among departments in connection with the period accounts. All indirect costs are reported with a department code. The company's is mainly financed by equity, i.e. the equity ratio is 70%. The interest rate on the bank loan is 5%. The bank loan is SEK 500,000. The owners' return requirement is 15%. At the end of each period, after allocating the indirect costs, the imputed capital cost, i.e. imputed interest cost, is calculated and recorded
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