Risser Woodworking Corporation produces fine cabinets.The company uses a job-order costing system in which its predetermined overhead rate is based on capacity.The capacity of the factory is determined by the capacity of its constraint,which is an automated jointer.Additional information is provided below for the most recent month:
The gross margin that would be reported on the income statement prepared for internal management purposes would be closest to:
A) $10,242
B) $19,142
C) $17,954
D) $62,310

Question

Risser Woodworking Corporation produces fine cabinets.The company uses a job-order costing system in which its predetermined overhead rate is based on capacity.The capacity of the factory is determined by the capacity of its constraint,which is an automated jointer.Additional information is provided below for the most recent month:
 The gross margin that would be reported on the income statement prepared for internal management purposes would be closest to:
A) $10,242 
B) $19,142 
C) $17,954 
D) $62,310

Quizplus · Accepted Answer

Predetermined overhead rate based on capacity = Estimated total fixed manufacturing overhead cost at capacity ÷ Estimated total amount of the allocation base at capacity = $14,256 ÷ 240 hours = $59.40 per hour
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Risser Woodworking Corporation Produces Fine Cabinets