The Management of Plitt Corporation Would Like to Investigate the Possibility

question 329

Multiple Choice

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 50,000 machine-hours. Capacity is 63,000 machine-hours and the actual level of activity for the year is assumed to be 55,000 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 $1,858,500 per year. It is assumed that a number of jobs were worked on during the year, one of which was Job Q20L which required 340 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:

• A) $10,030.00
• B) $11,488.91
• C) $9,118.18
• D) $12,637.80

---

Definitions:

Argument

A series of statements or reasons made to persuade others that an idea or point of view is correct or valid.

True

In accordance with fact or reality, without falsehood or error.

False

Not true; incorrect.

False Alternative

A logical fallacy that occurs when an argument presents a limited set of options as if they are the only possibilities when, in fact, more options exist.