The management of Chaloux 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. If the Corporation bases its predetermined overhead rate on capacity, by how much was manufacturing overhead underapplied or overapplied?
A)$9, 792 Overapplied
B)$1, 344 Overapplied
C)$9, 792 Underapplied
D)$1, 344 Underapplied

Question

The management of Chaloux 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.  If the Corporation bases its predetermined overhead rate on capacity, by how much was manufacturing overhead underapplied or overapplied?
A)$9, 792 Overapplied 
B)$1, 344 Overapplied 
C)$9, 792 Underapplied 
D)$1, 344 Underapplied

Quizplus · Accepted Answer

Predetermined overhead rate = Estimated total manufacturing overhead at capacity ÷ Estimated total amount of the allocation base at capacity = $57, 120 ÷ 21, 000 machine-hours = $2.72 per machine-hour
 11eaa0c8_9700_8b2e_9cb2_23484a9d6973_TB2487_00

The Management of Chaloux Corporation Would Like to Investigate the Possibility