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Question
Submitted by lbrnch on Sat, 2012-05-12 16:35
due on Sun, 2012-05-13 16:31
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accounting

Evening Star, Inc. produces binoculars of two quality levels: field and professional. The field model requires threee direct-labor hours, while the professional binoculars require five hours. The firm uses direct-labor hours for flexible budgeting.

1. How many standard hours are allowed in May, when 200 field models and 300 professional binoculars are manufactured?

2. Suppose the company based its flexible overhead budget for May on the number of binoculars manufactured, which is 500. What difficulties would this approach cause?

Answer
Submitted by Asma on Sat, 2012-05-12 23:46
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Star Inc. -Base for flexible overhead budget

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xxxxxxxxxxx

1.

xxxxxxxxxx

Standard

Hours xxx xxxx

Number

of Units

xxxxxx

xxxxxxxx xxxxx

xxxxx x

3

200

600

Professional x

x

300

xxxxx

Total

2,100

The xxxxx standard xxxxxxx xxxxxxxxxxxx xxxxx in May x xxxxx xxxxxx

x

xx

xxxxxx flexible xxxxxxxx xxxxxx xxxxx on xxxxx number of xxxxxxxxxx xxxxxxxx xxxx xxx xx xxxxxxxxxx xxxxxxxxx 500 binoculars xxxx xxx xxxxxx and 400 professionals. xxxxxx on xxx composition of 500 xxxxx different xxxxx of direct xxxxx xxxxx xx xxxxxxxx and different xxxxxxx xx variable-overhead xxxxx xxxxx be found. xxxx xxx xxxxxx xxx of confusion xxx xxxxxxxxxxxxxxxxx xxx xxxxxx xxx xxxxxxxx budget xx number xx binoculars is xxxxxxxxxxxxx


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Answer
Submitted by shahimermaid on Sat, 2012-05-12 21:55
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the answer is explained in the simplest way

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xxxxxx many xxxxxxxx xxxxx are allowed xx xxxx xxxx xxx field xxxxxx xxx 300 professional binoculars are xxxxxxxxxxxxx
DL xxxxx for xxxxx xxxxxx 200 x 3= 600 hours
DL xxxxx xxx Professional xxxxxx 300 x 5= 1500 xxxxx
xxxxxxxx hours allowed= 600+1500 x xxxx hour

2. Suppose the xxxxxxx xxxxx its flexible xxxxxxxx budget for xxx xx xxx number xx xxxxxxxxxx xxxxxxxxxxxxx which xx 500. xxxx xxxxxxxxxxxx would this approach cause?

We xxxx xxxx difficulty in xxxxxxxxxx overhead costs to the xxxxx xx xxx xxxxxxxxxxx In xxxxxxxx overhead xxxxxxx xxx costs xxxx with the xxxxx xx activity but since both xxx xxxxxx xx binoculars requires xxxxxxx xxx xxxxxxxx and xxxxxx in the xxxx required to make them, xx xxxx xxx be xxxx to xxxx true xxxxxxx when the differentiation xx xxx given.
It would not make sense to base flexible budget on hours xxxx output is of different products xxxx different xxxxxxxxxxx xx hours.
In xxxx case xxx flexible budget should be based on inputs xxxxxxxx required by different types xx binoculars


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