Ryan's Paints Allocates Overhead Based on Machine Hours

question 233

Multiple Choice

Ryan's Paints allocates overhead based on machine hours. Selected data for the most recent year follow. The estimates were made as of the beginning of the year, while the actual results were for the entire year.
The manufacturing overhead for the year would have been

• A)$10,000 overallocated.
• B)$10,000 underallocated.
• C)$40,000 overallocated.
• D)$40,000 underallocated.

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Definitions:

Peak Demand

The highest level of demand for a product or service over a specific period of time.

Forward Buy

A purchasing strategy where a buyer purchases larger quantities of goods in advance to take advantage of lower prices or to hedge against future price increases.

Profitability

The ability of a business to generate more revenue than the expenses incurred, resulting in a profit.

Manufacturing Capacity

The maximum amount of products a factory or production facility can produce within a given time period.