ForgeCrest: Overhead and Volatile Demand — سؤال دراسة حالة في المحاسب الإداري المعتمد

The case

ForgeCrest makes precision impellers for water-treatment pumps. Its original annual manufacturing overhead budget was $480,000 for 60,000 machine hours. The company uses normal costing and one plantwide machine-hour allocation rate. Actual activity was 55,000 machine hours and actual manufacturing overhead was $425,000. All production was completed and sold by year-end, and beginning and ending work in process and finished goods were zero.

Two new customer industries have made monthly order volumes less predictable. Management wants spending plans for low, expected, and high activity levels. It is also considering activity-based costing because short custom batches require many more setups and inspections than long standard runs. Currently, senior executives set operating budgets without consulting shop supervisors.

Assumptions

Apply overhead using the original predetermined rate multiplied by actual machine hours.
With no inventories, the complete overapplied or underapplied balance is closed to cost of goods sold.
Activity levels remain within a range where variable rates and total fixed costs are stable.
The budgeting questions concern internal planning and evaluation rather than predicting exact future sales.

How much manufacturing overhead should ForgeCrest apply to its annual production? Enter a positive whole-dollar amount rounded to the nearest dollar.

Answer USD

A whole number.

ForgeCrest has Overhead balance manufacturing overhead. Because all output was sold, before the closing adjustment its cost of goods sold is Unadjusted cost of goods sold and its gross profit is Unadjusted gross profit relative to the amounts after adjustment.

Arrange ForgeCrest's first ABC implementation in dependency order. For this project, management requires activity cost pools to be defined before drivers are selected, and rates to be approved before product assignment.

Dragging, or the arrow buttons, to reorder.

Apply each approved activity rate to the driver units consumed by each product.
Map overhead work into activity pools and collect the budgeted cost of each pool.
Divide each pool's budgeted cost by its budgeted driver quantity to establish a rate.
Choose a causal driver for each defined pool and estimate its budgeted quantity.

Saving…

Which TWO potential benefits justify ForgeCrest's ABC study? Select exactly TWO.

Select two answers. Selected 0 / 2

Answer It assigns setup and inspection costs by finished units so batch size stops affecting product cost. It turns each product's assigned overhead into the savings from dropping that product. It shows whether small custom batches consume disproportionate setup and inspection resources. It lets fixed support costs be flexed as variable costs at lower volumes. It gives managers better information on what drives costly activities, supporting their redesign.

Which budgeting approach best supports ForgeCrest's request for comparable spending plans at low, expected, and high machine-hour volumes?

Answer A single static expense budget with every line held constant. A flexible budget that separates variable rates from total fixed costs. A capital budget limited to equipment acquisitions. An expense forecast that multiplies every cost, including fixed rent, by the percentage change in volume.

Which TWO outcomes could result if ForgeCrest includes shop supervisors in developing and reviewing operating budgets? Select exactly TWO.

Select two answers. Selected 0 / 2

Answer The budget draws on supervisors' knowledge of maintenance needs and attainable setup times. Summing each department's locally feasible targets yields a feasible company plan without capacity reconciliation. Supervisors' unreviewed first drafts become final targets and form a more independent benchmark. Supervisors understand and accept targets they helped develop more readily. Departments keep different sales-volume assumptions in the final budget to preserve autonomy.

The marks, the correct answers and the explanations appear as soon as the answers are submitted. Unanswered questions earn no marks.

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