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?

---

Definitions:

Clevis Pins

Clevis pins are a type of fastener commonly used in mechanical linkages, allowing for rotation or movement of the connected parts while maintaining alignment.

Quick Release Fasteners

Mechanisms designed to fasten components together securely while also allowing for rapid removal or disassembly without requiring tools.

Semi-Permanent

Describes a connection or assembly that is designed to be disassembled and reassembled, but not intended for frequent changes.

Standard Taper Pins

Standard Taper Pins are conically shaped metal pins used to position and secure two parts together, allowing for easier alignment and assembly due to their tapered design.