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- Compute the allocation rate that was used for manufacturing overhead in Exhibits 2 and 3. Using these rates, show the computations that were used for allocating manufacturing overhead in Exhibits 2 and 3.
- Exhibit 4 shows a negative $15,000 overhead volume variance. Explain why it exists and why it is negative.
- Exhibit 4 also shows a positive $2,800 overhead budget variance. What are the potential causes for it?
- In Exhibit 4, the operating income is larger under absorption costing than under variable costing. Why? Please be very explicit in explaining the reason(s) for the difference.
- Use the information in Exhibit 1 to identify cost drivers and compute manufacturing overhead rates for machine maintenance, machine set up labor, and material handling. Use these overhead rates to calculate the cost of goods manufactured for a pair of machine-made shoes and a pair of handmade shoes, and compute the margin percentages for each.
- Ms. Nadalini has asked you if SISPA should get out of the machine-made shoe business. What do you recom- mend and why?
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