Dowty 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 lathe.Additional information is provided below for the most recent month:
The manufacturing overhead applied is closest to:
A) $19,964
B) $16,399
C) $7,639
D) $9,300

Question

Dowty 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 lathe.Additional information is provided below for the most recent month:
 The manufacturing overhead applied is closest to:
A) $19,964 
B) $16,399 
C) $7,639 
D) $9,300

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 = $19,964 ÷ 280 hours = $71.30 per hour
Manufacturing overhead applied = Predetermined overhead rate × Actual amount of the allocation base = 230 hours × $71.30 per hour = $16,399

Dowty Woodworking Corporation Produces Fine Cabinets