2. The case says that Kayem Foods is not meeting its profit targets. Why is it difficult for this firm to make money in this mar
1 answer:
Companies often set target for themselves. The reasons why it is difficult for this firm to make money is that;
- As a result of poor demand for the products
- It can be also be like due to the power or prestige gained over the years by the supermarkets is depreciating.
- This can be due to the small price margin or the price competition from other manufacturers.
- Losses encountered via the issue of Private Label
- Poor marketing and advertisement strategy and poor budget allocation for it.
Kayem Foods is a very popular brand. It is known to be a 4th generation family owned business. It has it headquartered in Chelsea, MA.
It is commonly known in the world to be the biggest processed meat company that is found in New England. They are based on natural casing, fully cooked and fresh sausage etc.
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Answer:
Data
Allocation Base Machine Hours
Estimated manufacturing overhead cost $300,000
Estimated total amount of allocation base 75,000 machine hours
Actual manufacturing overhead cost $290,000
Actual total amount of the allocation base 68,000 machine hours
Computation of predetermined overhead rate
Estimated manufacturing overhead cost $300,000
Estimated total amount of allocation base 75,000 machine hours
Predetermined overhead rate $4 per machine hour
= 300,000/75,000
= $4
Computation of underapplied or overapplied manufacturing overhead
Actual manufacturing overhead cost <u> $290,000</u>
Manufacturing overhead cost applied to WIP during the year:
Predetermined overhead rate $4 per machine hour
Actual total amount of allocation base <u> 68,000 </u>machine hours
Manufacturing overhead applied <u> $272,000</u>
= 68,000 * 4 = $272,000
Underapplied (overapplied) manufacturing <u> $18,000 underapplied</u>
overhead
