Explain how shaving 5% off the estimated direct labor hours in the base for the predetermined overhead rate usually results in a bog boost in net operating income at the end of the fiscal year.

Answer 1

Direct labor hours in the base or the predetermined overhead rate will lead over the increase overhead. However overhead could be higher than overhead, COGS will be direct labor hours. In addition, the holiday gift caused not incorrect in the model of net operating income during the fiscal year because adjustment is taken off COGS.I inventories, thus ,are overstated.However retained earning is also overstated