Fixed and Variable Costs; Overhead Rate; Agribusiness
The controller for Tender Bird Poultry, Inc. estimates that the company's fixed overhead is $100,000 Fixed and Variable Costs' per year. She also has determined that the variable overhead is approximately $.10 per chicken raised Overhead Rate2 Agribusiness and sold. Since the firm has a single product, overhead is applied on the basis of output units, chickens raised and sold.
Required:
1. Calculate the predetermined overhead rate under each of the following output predictions: 200,000 chickens. 300,000 chickens, and 400.000 chickens.
2. Does the predetermined overhead rate change in proportion to the change in predicted production? Why?.
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