Ethics predetermined overhead rate and capacity pat miranda assignment

I’m sorry, I don’t understand. J. : Marvin’s talking about something that happens fairly regularly. When sales are down and profits look like they are going to be lower than the president told the owners they were going to be, the president comes down here and asks us to deliver some more profits. Marvin: And we pull them out of our hat. j. : Yeah, we just increase production until we get the profits we want. Pat: I still don’t understand. You mean you increase sales? J. : Nope, we increase production. We’re the production managers, not the sales managers. Pat:

I get it. Since you have produced more, the sales force has more units it can sell. J. : Nope, the marketing people don’t do a thing. We just build inventories and that does the trick. Required: In all of the questions below, assume that the predetermined overhead rate under the traditional method is $25 per unit, and under the new method it is $20 per unit. Also assume that under the traditional method any underapplied or overapplied overhead is taken directly to the income statement as an adjustment to Cost of Goods Sold. 1. Suppose actual production is 160, 000 units.