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At the beginning of the year, Swaim Company estimated annual overhead costs to be $600,000 and machine hours to be used at 20In reporting discontinued operations, the income statement should show in a special section 1. gains on the disposal of a dis

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Answer #1

1) $540000

applied overhead=predetermined overhead rate*actual activity level

actual activity level= 180000 machine hours

predetermined overhead rate=budgeted overhead/budgeted activity level

budgeted over head is $600000 and budgeted activity level is 200000 machine hours

predetermined overhead rate=$600000/200000=$3 per machine hour

applied overhead=$3*180000=$540000

2) answer: both 1 and 2

in reportbing discontinued operation the income statement should show all the gains and losses on the disposal of discontinued component for accounting purposes, all the gains and losses for that division must be reported separately on the company's income statement.this is done because the cost of discontinued components must be distinguished from the continuing components.

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