Figure 11-7. Larry Miller,controller for Kipling Company,has Been Instructed to Develop a Develop

question 75

Essay

Figure 11-7.
Larry Miller,controller for Kipling Company,has been instructed to develop a flexible budget for overhead costs.The company produces two types of frozen desserts: Icey and Tasty.The two desserts use common raw materials in different proportions.The company expects to produce 200,000 gallons of each product during the coming year.Icey requires 0.25 direct labor hour per gallon and Tasty requires 0.30.Larry has developed the following fixed and variable costs for each of the four overhead items:
Refer to Figure 11-7.Assume that Kipling actually produced 240,000 gallons of Icey and 200,000 of Tasty.The actual overhead costs incurred were:
Required:

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Definitions:

Operating

Pertaining to the day-to-day functions and activities necessary for a business or organization to run effectively.

Internal Users

Individuals within an organization who use its financial information to make decisions, including executives, managers, and other employees.

Management Reports

Analytical reports designed for business managers to assist in making strategic decisions.

Decision Making

The cognitive process resulting in the selection of a course of action among several possible alternatives.