The management of Plitt Corporation would like to investigate the possibility of
ID: 2340242 • Letter: T
Question
The management of Plitt 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 78,000 machine-hours. Capacity is 101,000 machine-hours and the actual level of activity for the year is assumed to be 80,500 machine-hours. All of the manufacturing overhead is fixed and both the estimated amount at the beginning of the year and the actual amount at the end of the year are assumed to be $4,726,800 per year. It is assumed that a number of jobs were worked on during the year, one of which was Job Q20L which required 370 machine-hours. If the company bases its predetermined overhead rate on the estimated amount of the allocation base for the upcoming year, then the amount of manufacturing overhead charged to Job Q20L is closest to: Multiple Choice $17,316.00 $21,725.66 $16,778.24 $22,422.00Explanation / Answer
Correct Answer---$22,422
Calculations
Calculation of Predetermined overhead rate
(A)
Estimated overheads
$ 4,726,800.00
(B)
Estimated allocation base (machine hours)
78000
(A/B)
Predetermined overhead rate
$ 60.60
Allocation of Overhead on job Q20L
(A)
Predetermined overhead rate
$ 60.60
(B)
Machine hours used
370
(AxB)
Overheads allocated
$ 22,422.00
Calculation of Predetermined overhead rate
(A)
Estimated overheads
$ 4,726,800.00
(B)
Estimated allocation base (machine hours)
78000
(A/B)
Predetermined overhead rate
$ 60.60
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.