8 Assignment Example | Topics and Well Written Essays - 250 words

8 - Assignment Example It is observable that, the objective functions give the following results: The first objective function gives 8 and the second one gives -8. This is an indication that the two objective functions are not equivalent since they give dissimilar optimal values despite application of similar constraint values (Kathleen, 2001). Overhead costs refer to the circuitous (indirect) production costs. They are costs, which are chargeable to a cost unit by estimated basis. Similarly, overhead cost refers to the total cost of indirect materials, indirect labor and indirect expenses (Joel, 2004). The estimating method enables a share of the circuitous costs to be charged to each cost unit. It is notable that these charges are not identifiable specifically to the final product. For instance, these costs are chargeable on production centers, service cost centers and other non-production cost centers. Mr. Smith is right in calculating the marginal profit. It is evident that, he has used marginal costing (Joel, 2004). One of the principles guiding marginal costing rejects absorption of fixed costs into unit costs. In this case, factory overhead is a fixed expense, which cannot be absorbed to the rate per labor hour as Howie’s accountant suggests (Joel, 2004) However, it is notable that, the Howie’s opinion is applicable in absorption costing where fixed expenses are absorbed into unit costs (Joel,