(Appendix 11A)Nova Corporation Produces a Single Product and Uses a Standard

question 105

Essay

(Appendix 11A)Nova Corporation produces a single product and uses a standard cost system to help control costs.Overhead is applied to production on the basis of standard machine-hours.According to the company's flexible budget, the following overhead costs should be incurred at an activity level of 18, 000 machine-hours (the denominator activity level chosen for the current year): During the current year, the following operating results were recorded: At the end of the year, the company's Manufacturing Overhead account showed total debits for actual overhead costs of $145, 100 and total credits of $136, 000 for overhead applied.The difference ($9, 100)represents under-applied overhead, the cause of which management would like to know.
Required:
a.Compute the predetermined overhead rate that would have been used during the year, showing separately the variable and fixed components of the rate.
b.Show how the $136, 000 of overhead actually applied was computed.
c.Analyze the $9, 100 under-applied overhead figure in terms of the variable overhead rate and efficiency variances and the fixed manufacturing overhead budget and volume variances.

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Definitions:

Environmental Factors

Elements external to an individual, such as social, cultural, economic, and physical conditions, that influence one's development, behavior, and well-being.

Internal Mental Events

Processes that occur within the mind, such as thought, perception, and emotion, that are not observable by others.

B. F. Skinner

An American psychologist known for his work in developing the theory of operant conditioning within behavioral psychology.

John Watson

An American psychologist who established the psychological school of behaviorism, emphasizing the importance of observable behavior over internal mental states.