1) Explain how shaving 5% off the estimated direct labor hours in the base for the predetermined overhead rate usually results in a big boost in net…

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

2)   Should Cristin Madsen go along with the general manager’s request to reduce the direct labor hours in the predetermined overhead rate computation to 105,000 direct labor hours?

3)    Read the IMA’s Statement of Ethical Professional Practice (Principles, Standards, Resolution of Ethical Conflict) in the first chapter. Which Standard(s) would Cristin violate if she followed the general manager’s request?

4)   What are your recommendations for Cristin to resolve this conflict?

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