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binhto25 · Feb 23, 2010, 06:56 PM

The new predetermine rate with the purchase of a new machine is $66.67-what effect (if any) would this new rate have on the cost of jobs that do not use the new machine?

morgaine300 · Feb 24, 2010, 02:40 AM

Please see the guidelines for posting homework:
https://www.askmehelpdesk.com/financ...-b-u-font.html

binhto25 · Feb 24, 2010, 07:43 AM

Thanks for the post guideline morgaine300. Just for the record, I did do the homework and came up with the new predetermined rate of $66.67 (previous predetermine rate was $54 without the machine). I can't find anywhere in my text that discusse the effect this machine has on jobs that will not be using this new machine.

morgaine300 · Feb 26, 2010, 12:41 AM

It may not specifically discuss what getting a new machine will do, no. But it should discuss the basic concept of using predetermined rates on jobs. They want you to think about it, not find a direct answer in the book.

Think about this. Typical activity bases for applying overhead are machine hours, direct labor hours, and direct labor dollars. If you have a machine that squirts Pepsi into a bottle and a machine that sticks a cap on, and a machine that grabs six bottles and throws them into a carton, etc. does it make sense to use direct labor hours to apply overhead? If you are making custom-hand-made furniture, does it make sense to use machine hours to apply overhead?

The book should discuss the disadvantages of using one activity base for applying overhead, which is related to what I said above.