Calculating overhead absorption rate for different quantitie
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The controller for Tender Bird Poultry, Inc. estimates that the company's fixed overhead is $150,000 per year. She also has determined that the variable overhead is approximately $.15 per chicken raised and sold. Since the firm has a single product, overhead is applied on the basis of output units, chickens raised and sold.
Calculate the predetermined overhead rate under each of the following output predictions: 100,000 chickens, 200,000 chickens, and 300,000 chickens.
Does the predetermined overhead rate change in proportion to the change in predicted production? Why?
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Solution Summary
The attached Microsoft(R) Word document contains the full worked example of the problem given below.
The problem deals with how to calculate overhead rate for different levels of output.
Education
- B. Sc., University of Nigeria
- M. Sc., London South Bank University
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