Winston Company Estimates That the Factory Overhead for the Following

question 144

Multiple Choice

Winston Company estimates that the factory overhead for the following year will be $1,250,000. The company has decided that the basis for applying factory overhead should be machine hours, which is estimated to be 50,000 hours. The total machine hours for the year were 54,300. The actual factory overhead for the year was $1,375,000. Determine the over- or underapplied amount for the year.

• A)$17,500 overapplied
• B)$17,500 underapplied
• C)$118,250 overapplied
• D)$118,250 underapplied

Understand the concept of relevant range and its implications for cost behavior.

Understand the concept of relevant range of activity and its importance in cost analysis.

Calculate variable cost per unit within a given relevant range.

Determine contribution margin per unit and its significance in pricing and profit planning.

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Definitions:

Sales Budget

An estimate of future sales, often broken down by product lines or geographic areas, used for planning and guiding sales efforts.

Cash Disbursements

The outflow of cash for business expenses, acquisitions, or investments, documented within a specific period.

Raw Material Purchases

The acquisition of the basic substances or components that are used in the manufacturing process to produce finished goods.

Budgeted Sales

The forecasted sales for a specific period, serving as a key component of financial and operational planning.