The Management of Featheringham Corporation Would Like to Investigate the Possibility

question 221

Multiple Choice

The management of Featheringham 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 58,400 machine-hours. Capacity is 71,400 machine-hours and the actual level of activity for the year is assumed to be 55,400 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 $2,836,008 per year. It is assumed that a number of jobs were worked on during the year, one of which was Job Z77W which required 340 machine-hours.If the company bases its predetermined overhead rate on capacity, then the amount of manufacturing overhead charged to job Z77W is closest to:

• A) $13,504.80
• B) $16,799.40
• C) $17,744.95
• D) $17,405.10

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Definitions:

Frederick Macaulay

An economist known for pioneering the concept of bond duration, which measures the sensitivity of a bond's price to changes in interest rates.

Duration Concept

A measure of the sensitivity of a bond's price to changes in interest rates, gauging how much a bond's price will change for a given fluctuation in rates.

Price Volatility

The degree of variation in the price of a financial instrument, commodity, or market index over time, often measured by the standard deviation of returns.

Convexity

This is a measure of the curvature or the degree of the curve in the relationship between bond prices and bond yields, indicating how the duration of a bond changes as the interest rate changes.