The management of Griswell 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 39,000 machine-hours.In addition,capacity is 45,000 machine-hours and the actual level of activity for the year is 40,200 machine-hours.All of the manufacturing overhead is fixed and is $702,000 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 capacity,by how much was manufacturing overhead underapplied or overapplied?
A)$74,880 Overapplied
B)$21,600 Overapplied
C)$21,600 Underapplied
D)$74,880 Underapplied

Question

Quizplus · Accepted Answer

Predetermined overhead rate = Estimated total manufacturing overhead at capacity F1F1F1S1F1F1F10 Estimated total amount of the allocation base at capacity = $702,000 F1F1F1S1F1F1F10 45,000 machine-hours = $15.60 per machine-hour
 11eaa48f_7beb_05b7_9e4a_fd029c00bc38_TB2485_00

The Management of Griswell Corporation Would Like to Investigate the Possibility