At the Beginning of the Year, Monroe Company Estimates Annual

question 28

Multiple Choice

At the beginning of the year, Monroe Company estimates annual overhead costs to be $1,600,000 and that 300,000 machine hours will be operated.Using machine hours as a base, the amount of overhead applied during the year if actual machine hours for the year was 315,000 hours is

• A)$1,600,000.
• B)$1,523,809.
• C)$1,120,000.
• D)$1,680,000.

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Definitions:

Traditional Costing

A costing method that allocates overhead based on a single predetermined rate, usually ignoring the varying demands different products place on resources.

Direct Labor-Hours

The total number of labor hours spent on the production of goods or services.

Predetermined Overhead Rate

A rate calculated at the beginning of a period, based on the estimated overhead costs and estimated level of activity, used to apply overhead costs to products.

Activity-Based Costing

A costing method that assigns overhead and indirect costs to related products and services based on the actual consumption of resources.