QUESTION: After presenting your results to the CEO, she suggeststhat if Candor needs to change the way it allocates overhead, afull investigation of overhead methods be conducted. Potentiallyyou could also allocate overhead by departments (Cutting, Finishingand Assembly). As a result, the CEO wou ld like a full comparisonand analysis of the three alternatives suggested (plant-wide rateusing direct labor hours, plant-wide rate using machine hours andallocation by departments). In addition, she wants you to recommendwhich method should be implemented.
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