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    Outside Supplier Financials, Operating income, Overhead

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    2. Is the offer from the outside supplier financially attractive? Why?

    3. a) Prepare a report that shows the effect on the company's total net operating income of buying part A55 from the supplier rather than continuing to make it inside the company.
    b) Which alternative should the company choose?

    4. a) Determine the predetermined overhead rate if the predetermined overhead rate is based on the estimated amount of the allocation base.
    b) Determine the underapplied or overapplied overhead for the year if the predetermined overhead rate if based on the estimated amount of the allocation base.
    c) Determine the predetermined overhead rate if the predetermined overhead rate is based on the amount of the allocation base at capacity.
    d) Determine the underapplied or overapplied overhead for the year if the predetermined overhead rate is based on the amount of the allocation base at capacity.

    5. Determine the underapplied or overapplied overhead for the year if the predetermined overhead rate is based on the amount of the allocation base at capacity.

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    https://brainmass.com/business/accounting/outside-supplier-financials-operating-income-overhead-315356

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    Dear student,

    Detailed explanation given.Please also see the comments on 2.4.

    EXPLANATION: 1
    Answer to question no:2 The unit cost is 79.2. However, the fixed overhead portion of manufacturing overhead SHOULD NOT be
    taken into account for the purpose of decision.Because, fixed cost is IRRELAVANT COST.
    variable cost Theerefore, out of $24 (manufacturing overhead), variable portion should be taken into consideration.
    direct material 30 Total overhead: (variable overhead+ fixed overhead)= (70000+630000)=700000
    direct labour 25.2 Therefore variable portion of 24 is (24/700000)*70000= 2.4
    variable overhead 2.4
    57.6
    This is other way of computing 2.4
    manufacturing overhead applied 24
    overhead rate 20
    hours 1.2
    variable ...

    Solution Summary

    This solution helps answer question about outside supplier financials, operating income and overhead.

    $2.19