When is Overhead is Described as Underapplied Coursework

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Student’s Name
Institutional
Coursework
Question 2
Overheads are described as underapplied when a company’s initial approximations of overheads exceeds the actual overheads. Particularly, this situations arises when the company’s standard provision amount per unit of production fails to equal with the actual overheads that was incurred in the financial period (Drury, 2013). On the other hand, overheads are described as Overapplied when the company’s initial approximations of overheads fall short the actual overheads (Drury, 2013).
At the end of the period, the disposition of underapplied and overapplied overheads considers the significance of the amount involved. In the event where the amount is negligible or immaterial it is treated as the cost of goods sold and closed. This is treated so because an underapplied overheads causes a debit balance which causes the cost of goods sold to increase (Drury, 2013). Similarly, an overapplied overhead leads to a credit balance that causes the cost of goods sold to decreases.
Overhead might be underapplied in a given year due to the following reasons: First it can be underapplied due to poor management and control of overhead spending which might causes the estimate overhead cost to exceed the actual overhead cost. Second, overhead might be underapplied if some overheads are fixed while the actual allocation amount per unit for the period falls short than the actual estimated amount at the start of the period (Drury, 2013).
Question 3
A job cost sheet refers to a document whereby the cost of manufacturing are recorded and it is mostly applicable where companies’ uses job order-costing system. Job cost sheets are used to calculate and apportion costs to products and services (Michael R. Kinney, 2010). Additionally, a job cost sheets is used to detail all the important information about the cost incurred to complete the job (Michael R. Kinney, 2010).
If the units produced and unit sales are equal, Absorption costing should be used instead of, variable costing because the former tend to display a higher cost of income than the latter (Michael R. Kinney, 2010). This is because under absorption costing, there is a difference between the parts of the fixed manufacturing overheads for the current period and the future period. On the contrary, the entire current fixed manufacturing cost is immediately expensed under variable costing (Michael R. Kinney, 2010).
Operating leverage refers to assessing of the ration combination of fixed and variable cost that a firm or project incurs (Michael R. Kinney, 2010).
Question 4
In the calculation of ROI, margin means the ratio net operation income to total revenue whereas the term turnover is the ratio of total revenue collected to the average operating assets. In this case operating assets includes items such as properties and equipment’s, inventories and cash (Bhimani, Horngren, & Datar, 2015).
Residual income occurs where some amount of money remains after the necessary costs and expenses have been settled for a period. Corporate residual income is calculated as; Residual income = Net Operating ...