Deck 17: The Predetermined Overhead Rate and Capacity

Question 1

The management of Keeter 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 89,000 machine-hours. In addition, capacity is 96,000 machine-hours and the actual level of activity for the year is 88,600 machine-hours. All of the manufacturing overhead is fixed and is $7,176,960 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,the predetermined overhead rate is closest to:

A)$74.76
B)$81.00
C)$80.64
D)$79.66

Answer 1

$74.76

Question 2

If predetermined overhead rates are based on budgeted activity and overhead includes significant fixed costs,then the unit product costs will fluctuate depending on the budgeted level of activity for the period.

Answer 2

True

Question 3

The management of Bellon 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 23,000 machine-hours. In addition, capacity is 27,000 machine-hours and the actual level of activity for the year is 23,300 machine-hours. All of the manufacturing overhead is fixed and is $142,830 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 P50E. This job required 160 machine-hours.

-If the company bases its predetermined overhead rate on capacity,the predetermined overhead rate is closest to:

A)$6.43
B)$5.29
C)$6.13
D)$6.21

Answer 3

$5.29

Question 4

The management of Bellon 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 23,000 machine-hours. In addition, capacity is 27,000 machine-hours and the actual level of activity for the year is 23,300 machine-hours. All of the manufacturing overhead is fixed and is $142,830 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 P50E. This job required 160 machine-hours.

-If the company bases its predetermined overhead rate on capacity,by how much was manufacturing overhead underapplied or overapplied?

A)$1,863 Underapplied
B)$19,573 Underapplied
C)$19,573 Overapplied
D)$1,863 Overapplied

Question 5

The management of Foy 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 86,000 machine-hours. In addition, capacity is 94,000 machine-hours and the actual level of activity for the year is 88,200 machine-hours. All of the manufacturing overhead is fixed and is $6,790,560 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,by how much was manufacturing overhead underapplied or overapplied?

A)$418,992 Overapplied
B)$173,712 Underapplied
C)$418,992 Underapplied
D)$173,712 Overapplied

Question 6

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 7

The management of Bellon 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 23,000 machine-hours. In addition, capacity is 27,000 machine-hours and the actual level of activity for the year is 23,300 machine-hours. All of the manufacturing overhead is fixed and is $142,830 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 P50E. This job required 160 machine-hours.

-If the company bases its predetermined overhead rate on capacity,the amount of manufacturing overhead charged to the job P50E is closest to:

A)$1,029.41
B)$993.60
C)$846.40
D)$980.81

Question 8

The management of Keeter 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 89,000 machine-hours. In addition, capacity is 96,000 machine-hours and the actual level of activity for the year is 88,600 machine-hours. All of the manufacturing overhead is fixed and is $7,176,960 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:

A)$81.00
B)$79.66
C)$74.76
D)$80.64

Question 9

The management of Bow 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 54,000 machine-hours. In addition, capacity is 68,000 machine-hours and the actual level of activity for the year is 53,100 machine-hours. All of the manufacturing overhead is fixed and is $2,129,760 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 E82X. This job required 100 machine-hours.

-If the company bases its predetermined overhead rate on capacity,the predetermined overhead rate is closest to:

A)$41.92
B)$31.32
C)$39.44
D)$40.11

Question 10

The management of Chaloux 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. If the company 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 11

When the fixed costs of capacity are spread over the level of activity at capacity rather than the estimated activity for the period,the units that are produced must shoulder the costs of unused capacity.

Question 12

The management of Daguio 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 54,000 machine-hours. In addition, capacity is 63,000 machine-hours and the actual level of activity for the year is 53,000 machine-hours. All of the manufacturing overhead is fixed and is $1,871,100 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)$34,650 Overapplied
B)$34,650 Underapplied
C)$297,000 Overapplied
D)$297,000 Underapplied

Question 13

The management of Keeter 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 89,000 machine-hours. In addition, capacity is 96,000 machine-hours and the actual level of activity for the year is 88,600 machine-hours. All of the manufacturing overhead is fixed and is $7,176,960 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,by how much was manufacturing overhead underapplied or overapplied?

A)$32,256 Underapplied
B)$553,224 Underapplied
C)$553,224 Overapplied
D)$32,256 Overapplied

Question 14

The management of Foy 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 86,000 machine-hours. In addition, capacity is 94,000 machine-hours and the actual level of activity for the year is 88,200 machine-hours. All of the manufacturing overhead is fixed and is $6,790,560 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)$173,712 Underapplied
B)$418,992 Underapplied
C)$418,992 Overapplied
D)$173,712 Overapplied

Question 15

The management of Bellon 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 23,000 machine-hours. In addition, capacity is 27,000 machine-hours and the actual level of activity for the year is 23,300 machine-hours. All of the manufacturing overhead is fixed and is $142,830 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 P50E. This job required 160 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 P50E is closest to:

A)$846.40
B)$980.81
C)$993.60
D)$1,029.41

Question 16

The management of Bow 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 54,000 machine-hours. In addition, capacity is 68,000 machine-hours and the actual level of activity for the year is 53,100 machine-hours. All of the manufacturing overhead is fixed and is $2,129,760 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 E82X. This job required 100 machine-hours.

-If the company bases its predetermined overhead rate on capacity,the amount of manufacturing overhead charged to the job E82X is closest to:

A)$4,010.85
B)$3,672.00
C)$3,132.00
D)$4,192.44

Question 17

The management of Bellon 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 23,000 machine-hours. In addition, capacity is 27,000 machine-hours and the actual level of activity for the year is 23,300 machine-hours. All of the manufacturing overhead is fixed and is $142,830 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 P50E. This job required 160 machine-hours.

-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:

A)$6.13
B)$6.43
C)$5.29
D)$6.21

Question 18

The management of Bellon 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 23,000 machine-hours. In addition, capacity is 27,000 machine-hours and the actual level of activity for the year is 23,300 machine-hours. All of the manufacturing overhead is fixed and is $142,830 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 P50E. This job required 160 machine-hours.

-If the company bases its predetermined overhead rate on the estimated amount of the allocation base for the upcoming year,by how much was manufacturing overhead underapplied or overapplied?

A)$1,863 Overapplied
B)$1,863 Underapplied
C)$19,573 Underapplied
D)$19,573 Overapplied

Question 19

The management of Keeter 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 89,000 machine-hours. In addition, capacity is 96,000 machine-hours and the actual level of activity for the year is 88,600 machine-hours. All of the manufacturing overhead is fixed and is $7,176,960 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)$553,224 Overapplied
B)$32,256 Underapplied
C)$32,256 Overapplied
D)$553,224 Underapplied

Question 20

The management of Daguio 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 54,000 machine-hours. In addition, capacity is 63,000 machine-hours and the actual level of activity for the year is 53,000 machine-hours. All of the manufacturing overhead is fixed and is $1,871,100 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,the predetermined overhead rate is closest to:

A)$36.98
B)$29.70
C)$35.30
D)$34.65

Question 21

The management of Gruwell 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 48,000 machine-hours.In addition,capacity is 53,000 machine-hours and the actual activity for the year is 47,700 machine-hours.All of the manufacturing overhead is fixed and is $1,144,800 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 J42O,which required 40 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 estimated amount of the allocation base.
b.Determine how much overhead would be applied to Job J42O if the predetermined overhead rate is based on estimated amount of the allocation base.
c.Determine the underapplied or overapplied manufacturing overhead for the year if the predetermined overhead rate is based on the estimated amount of the allocation base.
d.Determine the predetermined overhead rate if the predetermined overhead rate is based on the amount of the allocation base at capacity.
e.Determine how much overhead would be applied to Job J42O if the predetermined overhead rate is based on the amount of the allocation base at capacity.
f.Determine the underapplied or overapplied manufacturing overhead for the year if the predetermined overhead rate is based on the amount of the allocation base at capacity.

Question 22

The management of Rainha 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 13,000 machine-hours.In addition,capacity is 16,000 machine-hours and the actual activity for the year is 12,900 machine-hours.All of the manufacturing overhead is fixed and is $29,120 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:
a.Determine the predetermined overhead rate if the predetermined overhead rate is based on the amount of the allocation base at capacity.
b.Determine the underapplied or overapplied manufacturing overhead for the year if the predetermined overhead rate is based on the amount of the allocation base at capacity.

Question 23

The management of Scurlock 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 19,000 machine-hours.In addition,capacity is 21,000 machine-hours and the actual activity for the year is 18,200 machine-hours.All of the manufacturing overhead is fixed and is $71,820 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:
a.Determine the predetermined overhead rate if the predetermined overhead rate is based on the estimated amount of the allocation base.
b.Determine the underapplied or overapplied manufacturing overhead for the year if the predetermined overhead rate is based on the estimated amount of the allocation base.
c.Determine the predetermined overhead rate if the predetermined overhead rate is based on the amount of the allocation base at capacity.
d.Determine the underapplied or overapplied manufacturing overhead for the year if the predetermined overhead rate is based on the amount of the allocation base at capacity.

Question 24

The management of Niemeyer 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 70,000 machine-hours.In addition,capacity is 82,000 machine-hours and the actual activity for the year is 72,900 machine-hours.All of the manufacturing overhead is fixed and is $4,132,800 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 O65A,which required 300 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 O65A if the predetermined overhead rate is based on the amount of the allocation base at capacity.
c.Determine the underapplied or overapplied manufacturing overhead for the year if the predetermined overhead rate is based on the amount of the allocation base at capacity.

Question 25

The management of Trew 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 46,000 machine-hours and the actual activity for the year is 36,900 machine-hours.All of the manufacturing overhead is fixed and is $697,820 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:
a.Determine the underapplied or overapplied manufacturing overhead for the year if the predetermined overhead rate is based on the estimated amount of the allocation base.
b.Determine the underapplied or overapplied manufacturing overhead for the year if the predetermined overhead rate is based on the amount of the allocation base at capacity.

Question 26

The management of Svatek 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 16,000 machine-hours.In addition,capacity is 20,000 machine-hours and the actual activity for the year is 17,800 machine-hours.All of the manufacturing overhead is fixed and is $51,200 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 manufacturing overhead for the year if the predetermined overhead rate is based on the amount of the allocation base at capacity.

Question 27

The management of Bow 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 54,000 machine-hours. In addition, capacity is 68,000 machine-hours and the actual level of activity for the year is 53,100 machine-hours. All of the manufacturing overhead is fixed and is $2,129,760 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 E82X. This job required 100 machine-hours.

-If the company bases its predetermined overhead rate on capacity,by how much was manufacturing overhead underapplied or overapplied?

A)$466,668 Underapplied
B)$466,668 Overapplied
C)$35,496 Overapplied
D)$35,496 Underapplied