The management of Wrights 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.
Required:
a.Determine the predetermined overhead rate if the predetermined overhead rate is based on the estimated activity for the upcoming year.
at capacity.
b.Determine the cost of unused capacity for the year if the predetermined overhead rate is based on activity at capacity.

Question

The management of Wrights 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.
  Required:
a.Determine the predetermined overhead rate if the predetermined overhead rate is based on the estimated activity for the upcoming year.
at capacity.
b.Determine the cost of unused capacity for the year if the predetermined overhead rate is based on activity at capacity.

Quizplus · Accepted Answer

The Answer of The management of Wrights 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.
  Required:
a.Determine the predetermined overhead rate if the predetermined overhead rate is based on the estimated activity for the upcoming year.
at capacity.
b.Determine the cost of unused capacity for the year if the predetermined overhead rate is based on activity at capacity.

The Management of Wrights Corporation Would Like to Investigate the Possibility