Q1. Evaluate the performance of three product lines under the current costing system and identify issues or problems associated the company’s overhead costs assignment?
Q2. Should executives abandon overhead assignment to products entirely and adopt a contribution margin approach in which manufacturing overhead is treated as a period expense? Why or why not?
Q3. Calculate the practical capacity and the capacity cost rates for each of the company’s resources: production and setup employees, machines, receiving and production control employees, shipping and packaging employees, and engineers.
Q4. Use these capacity cost rates and the production data in Exhibits 3 and 4 to calculate revised costs and profits for the company’s three product lines. What difference does your cost assignment have on reported product costs and profitability? What causes the shifts in cost and profitability?