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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