PPX Is a Specialized Packaging Company That Packages Other Manufacturers

question 16

Essay

PPX is a specialized packaging company that packages other manufacturers' products. Other manufacturers ship their products to PPX in bulk. PPX then packages the products using high-speed, state-of-the-art packaging machines and ships the packaged products to wholesalers. A typical order involves packaging small toys in see-through plastic and cardboard containers.
PPX uses a flexible budget to forecast annual plantwide overhead, which is then allocated to jobs based on machine hours. The annual flexible overhead budget is projected to be $6 million of fixed costs and $120 per machine hour. The budgeted number of machine hours for the year is 20,000.
At the end of the year, 21,000 machine hours were used and actual overhead incurred was $9.14 million.
Required:
a. Calculate the overhead rate set at the beginning of the year.
b. Calculate the amount of over/under-absorbed overhead for the year.
c. The company's policy is to write off any over/under-absorbed overhead to cost of goods sold. Will net income rise or fall this year when the over/under-absorbed overhead is written off to cost of goods sold?

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Definitions:

Pedophilic Disorder

A psychiatric disorder characterised by sexual attraction to prepubescent children by an adult or older adolescent.

Pedophiles

Individuals who have a primary or exclusive sexual attraction to prepubescent children.

Enticement

The act of attracting or tempting someone, often to do something they would not normally do.

Pedophilic Disorder

A mental health condition where an adult has a sexual preference for children who have not yet reached puberty.