Exam 16: the Predetermined Overhead Rate and Capacity

(Appendix 4B)The management of Cordona Corporation would like to investigate the possibility of basing its predetermined overhead rate on activity at capacity.The company's controller has provided an example to illustrate how this new system would work.In this example, the allocation base is machine-hours and the estimated amount of the allocation base for the upcoming year is 27, 000 machine-hours.In addition, capacity is 33, 000 machine-hours and the actual level of activity for the year is 27, 900 machine-hours.All of the manufacturing overhead is fixed and is $231, 660 per year.For simplicity, it is assumed that this is the estimated manufacturing overhead for the year as well as the manufacturing overhead at capacity.It is further assumed that this is also the actual amount of manufacturing overhead for the year.A number of jobs were worked on during the year, one of which was Job I86N.This job required 370 machine-hours. If the company bases its predetermined overhead rate on capacity, the amount of manufacturing overhead charged to job I86N is closest to:

(Appendix 4B)The management of Aamot Corporation would like to investigate the possibility of basing its predetermined overhead rate on activity at capacity.The company's controller has provided an example to illustrate how this new system would work.In this example, the allocation base is machine-hours and the estimated amount of the allocation base for the upcoming year is 43, 000 machine-hours.In addition, capacity is 47, 000 machine-hours and the actual level of activity for the year is 42, 100 machine-hours.All of the manufacturing overhead is fixed and is $828, 610 per year.For simplicity, it is assumed that this is the estimated manufacturing overhead for the year as well as the manufacturing overhead at capacity.It is further assumed that this is also the actual amount of manufacturing overhead for the year. If the company bases its predetermined overhead rate on the estimated amount of the allocation base for the upcoming year, the predetermined overhead rate is closest to:

(Appendix 4B)The management of Del Corporation would like to investigate the possibility of basing its predetermined overhead rate on activity at capacity rather than on the estimated amount of activity for the year.The company's controller has provided an example to illustrate how this new system would work.In this example, the allocation base is machine-hours and the estimated amount of the allocation base for the upcoming year is 37, 000 machine-hours.In addition, capacity is 44, 000 machine-hours and the actual activity for the year is 40, 100 machine-hours.All of the manufacturing overhead is fixed and is $634, 920 per year.For simplicity, it is assumed that this is the estimated manufacturing overhead for the year as well as the manufacturing overhead at capacity and the actual amount of manufacturing overhead for the year. Required: Determine the underapplied or overapplied overhead for the year if the predetermined overhead rate is based on the amount of the allocation base at capacity.

(Appendix 4B)When the predetermined overhead rate is based on the level of activity at capacity, underapplied manufacturing overhead may be called the Cost of Unused Capacity and treated as a period expense.

(Appendix 4B)The management of Digges Corporation would like to investigate the possibility of basing its predetermined overhead rate on activity at capacity.The Corporation's controller has provided an example to illustrate how this new system would work.In this example, the allocation base is machine-hours and the estimated amount of the allocation base for the upcoming year is 51, 000 machine-hours.In addition, capacity is 63, 000 machine-hours and the actual level of activity for the year is 53, 300 machine-hours.All of the manufacturing overhead is fixed and is $1, 702, 890 per year.For simplicity, it is assumed that this is the estimated manufacturing overhead for the year as well as the manufacturing overhead at capacity.It is further assumed that this is also the actual amount of manufacturing overhead for the year.If the Corporation bases its predetermined overhead rate on capacity, by how much was manufacturing overhead underapplied or overapplied?

(Appendix 4B)The management of Benedict Corporation would like to investigate the possibility of basing its predetermined overhead rate on activity at capacity.The company's controller has provided an example to illustrate how this new system would work.In this example, the allocation base is machine-hours and the estimated amount of the allocation base for the upcoming year is 29, 000 machine-hours.In addition, capacity is 36, 000 machine-hours and the actual level of activity for the year is 26, 600 machine-hours.All of the manufacturing overhead is fixed and is $334, 080 per year.For simplicity, it is assumed that this is the estimated manufacturing overhead for the year as well as the manufacturing overhead at capacity.It is further assumed that this is also the actual amount of manufacturing overhead for the year.A number of jobs were worked on during the year, one of which was Job B04D.This job required 150 machine-hours. If the company bases its predetermined overhead rate on the estimated amount of the allocation base for the upcoming year the amount of manufacturing overhead charged to the Job B04D is closest to:

(Appendix 4B)The management of Benedict Corporation would like to investigate the possibility of basing its predetermined overhead rate on activity at capacity.The company's controller has provided an example to illustrate how this new system would work.In this example, the allocation base is machine-hours and the estimated amount of the allocation base for the upcoming year is 29, 000 machine-hours.In addition, capacity is 36, 000 machine-hours and the actual level of activity for the year is 26, 600 machine-hours.All of the manufacturing overhead is fixed and is $334, 080 per year.For simplicity, it is assumed that this is the estimated manufacturing overhead for the year as well as the manufacturing overhead at capacity.It is further assumed that this is also the actual amount of manufacturing overhead for the year.A number of jobs were worked on during the year, one of which was Job B04D.This job required 150 machine-hours. If the company bases its predetermined overhead rate on capacity, the amount of manufacturing overhead charged to the job B04D is closest to:

(Appendix 4B)The management of Roger Corporation would like to investigate the possibility of basing its predetermined overhead rate on activity at capacity rather than on the estimated amount of activity for the year.The company's controller has provided an example to illustrate how this new system would work.In this example, the allocation base is machine-hours and the estimated amount of the allocation base for the upcoming year is 49, 000 machine-hours.In addition, capacity is 60, 000 machine-hours and the actual activity for the year is 47, 900 machine-hours.All of the manufacturing overhead is fixed and is $1, 587, 600 per year.For simplicity, it is assumed that this is the estimated manufacturing overhead for the year as well as the manufacturing overhead at capacity and the actual amount of manufacturing overhead for the year.Job T43G, which required 130 machine-hours, is one of the jobs worked on during the year. Required: a.Determine the predetermined overhead rate if the predetermined overhead rate is based on the amount of the allocation base at capacity. b.Determine how much overhead would be applied to Job T43G if the predetermined overhead rate is based on the amount of the allocation base at capacity. c.Determine the underapplied or overapplied overhead for the year if the predetermined overhead rate is based on the amount of the allocation base at capacity.