The Management of Bullinger Corporation Would Like to Investigate the Possibility

question 339

Multiple Choice

The management of Bullinger 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 9,000 machine-hours. Capacity is 12,000 machine-hours and the actual level of activity for the year is assumed to be 7,700 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 $11,880 per year. For simplicity, it is assumed that this is the estimated manufacturing overhead for the year as well as the manufacturing overhead at capacity. It is further assumed that this is also the actual amount of manufacturing overhead for the year.If the company bases its predetermined overhead rate on the estimated amount of the allocation base for the upcoming year, then the predetermined overhead rate is closest to:

• A) $1.32 per machine-hour
• B) $1.49 per machine-hour
• C) $0.99 per machine-hour
• D) $1.54 per machine-hour

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Definitions:

Mitochondrion

A membrane-bound organelle found in most eukaryotic cells, responsible for producing ATP through the process of oxidative phosphorylation.

Oxidative Deamination

A chemical reaction in which an amino group is removed from an amino acid, producing a keto acid and ammonia, often occurring in the liver.

Nonessential Amino Acids

Amino acids that the human body can synthesize on its own and does not need to obtain directly through diet.

Aerobic Respiration

The metabolic process of converting nutrients into energy in the presence of oxygen, producing carbon dioxide and water as byproducts.