Question 1 - Technics Inc., a manufacturing company, utilizes job order costing. Each division establishes its own estimates regarding overhead which are as follows:
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Division A
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Division B
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Total estimated overhead
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DH 128,000
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DH 261,000
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Total estimated machine hours
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16,000
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72,500
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Total estimated direct labor costs
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DH 155,000
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DH 290,000
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Required:
1. If Division A allocates overhead on the basis of machine hours, and Division B allocates overhead as a percentage of direct labor costs, what would the predetermined overhead rate be for each division?
2. Crain Company budgeted 35,000 direct labor hours and incurred 40,000 direct labor hours. It incurred DH 780,000 of overhead and estimated overhead was DH 735,000.
What is Crain's predetermined overhead rate? Was overhead overapplied or underapplied for the year'. By how much?
Question 2 - Management has decided to move production to an overseas plant in order to lower product costs. Which management responsibilities are involved in this decision and why?