For years, EML has allocated overhead based on total machine hours. A recent assessment of overhead
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
For years, EML has allocated overhead based on total machine hours. A recent assessment of overhead
costs has shown that these costs are now more than 45 per cent of the company's total costs. Sara is
specifically worried about this variance, and as a managing director, she is trying to control overhead
better. For this purpose, the head of the
system. Each cutting board goes through the five processes. These processes are elaborated on in the
following paragraph.
To better control overhead, EML is adopting an activity-based costing system. Each cutting board goes
through the following processes. The given data reveals that cutting is the first process. In this process,
boards are selected from inventory and are cut to the required width and length. Imperfections in
boards (such as knots or cracks) are identified and removed. The second process is assembly. In this
process, cut wooden pieces are laid out on clamps, a layer of glue is applied to each piece, and then
glued pieces are clamped together until the glue sets. The third process is shaping. Once the glue has
been set, the boards are sent to the shaping process, where they are cut into specific shapes. After being
shaped, the cutting boards must be sanded smooth. In this setting, sanding is the fourth process. The
fifth process is finishing. In this process, sanded cutting boards receive a coat of mineral oil to help
preserve the wood. The last process is packing. In the packing process, finished cutting boards are
placed in boxes of 12. The boxes are sealed, addressed, and sent to one of the kitchen stores.
Required: Suggest the most suitable component of overhead for EML. Further, determine a logical cost
driver for each process
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