You are the management accountant for Newberry Manufacturing. Your company does custom carpentry work and uses a job order cost accounting system. Newberry sends detailed job cost sheets to its customers, along with an invoice. The job cost sheets show the date materials were used, the dollar cost of materials, and the hours and cost of labor.
A predetermined overhead application rate is used, and the total overhead applied is also listed.
Donna Werly is a customer who recently had custom cabinets installed. Along with her check in payment for the work done, she included a letter. She thanked the company for including the detailed cost information but questioned why overhead was estimated. She stated that she would be interested in knowing exactly what costs were included in overhead, and she thought that other customers would, too.
Prepare a letter to Ms. Werly (address: 123 Cedar Lane, Altoona, Kansas 66651) and tell her why you did not send her information on exact costs of overhead included in her job. Respond to her suggestion that you provide this information.