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Antonio H


Date added:

December 6, 2015








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2 / 549


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In 1987, overhead was allocated to each product at the rate of 437% of direct labor costs. As you can also see in exhibit 1, there was a significant increase in the overhead allocation rate from 1988 to 1989. This was due to the outsourcing of oil pans and muffler-exhaust systems which resulted in a decrease in labor...
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Product costs for the oil pans and muffler-exhaust systems were classified as Class III by the consultants due to the fact that their costs were 15% higher than competitors. However, we do not feel that the appropriate measures were used when classifying product costs. Gross-margin and gross-margin percentage calculations are useful when wanting to compare the profitability of different products...
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