Question

You are responsible for updating the predetermined overhead rate for your company, analyzing the current costs, using projected changes, and creating the rate for the next year. You notice the maintenance cost had almost doubled last year compared to prior years. You need to analyze this situation more and determine ways to better track this increase. The factory manager has suggested you spread the costs over all the departments to smooth the increase.

1. Determine a costing system to use to help better analyze the increase. Explain how this system will allow for future analysis to identify the increases.
2. If the manager pushes to spread the costs, what are the options you have to ensure you are protecting the company from irregular increases?

Answer 1

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