Comprehensive Absorption Costing Problem

Essay

Comprehensive Absorption Costing Problem
The Denna Water plant in Sarasota, Florida, bottles purified and flavored waters in a variety of sizes (20, 36, 48, and 64 ounces) for sale through vending machines and retail stores. Volume is measured as bottled ounces. The plant's annual budgeted fixed manufacturing overhead amounts to $1.8 million, and variable manufacturing overhead is projected at $0.005 per bottled ounce. Projected volume in the Sarasota plant next year is 200 million ounces. Actual volume for the year accumulated to 210 million ounces and total manufacturing overhead incurred (both fixed and variable) was $2.85 million.
Required:
a. Calculate the Denna Sarasota plant overhead rate.
b. How much overhead was absorbed to products in the Sarasota plant?
c. Calculate the Denna Sarasota plant's over- or under-absorbed overhead.
d. Describe the effect on income when the over- or under-absorbed overhead calculated in (c) is written off to cost of goods sold.