Oliver's Company (OC) produces organic dog food in batches of chicken and beef. Each time OC switches production from chicken to beef, workers must clean the equipment and change the settings. These costs are called setup costs. OC plans 310 batches for the chicken dog food and 310 batches for the beef dog food. OC expects total set-up costs of $124,000. What is the allocation rate per setup?
Allocation rate = Overhead cost/Allocation base = 124,000/310 = 400 per setup |
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The Watts Company is a publicly traded corporation that
produces different types of commercial food processors. My name is
Alan Smith and I have worked for this company for the last ten
years in the controller’s office. I was both an accounting and
finance major in university. The company currently produces 300
products and does not anticipate any new products coming out over
the next three years. I have previously mentioned to my superiors
that it is not appropriate for...