Dana Boar, controller of Digital Electronics Canada, developed the figures requested by her boss and president of Digital Electronics Canada, Hans Fritz. The numbers allowed her to see how the projected sales volume for 2017 related to breakeven, and examine the relative profitability of the two products, DELTA1 and DELTA2. Boar thought the figures were OK as far has her analysis went, but she began to wonder about some of the assumptions built into her calculations. For example, she had used direct labor as a base for distributing indirect manufacturing overhead because that was the system traditionally used by the parent company. She recognized that the assumption on which that system was based was that the amount of direct labor used by a product was a good predictor of the amount of overhead that should be charged to it.
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