(Appendix 2B) the Management of Featheringham Corporation Would Like to Investigate

question 13

Multiple Choice

(Appendix 2B) 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 62,000 machine-hours. Capacity is 75,000 machine-hours and the actual level of activity for the year is assumed to be 59,000 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 $2,836,500 per year. It is assumed that a number of jobs were worked on during the year, one of which was Job Z77W which required 410 machine-hours.
-If the company bases its predetermined overhead rate on capacity,then the predetermined overhead rate is closest to:

• A) $48.08 per machine-hour
• B) $37.82 per machine-hour
• C) $48.91 per machine-hour
• D) $45.75 per machine-hour

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Definitions:

Common Carriers

Entities that provide transportation or communication services to the public under license or authority from a regulatory body.

Warehouse Companies

Businesses that specialize in storing goods, products, or commodities in large buildings before they are distributed for sale or further production.

Interests in Land

Legal rights or claims to the use, control, and benefits of a specific piece of land.

Rights to Possess

This refers to the legal right of an individual or entity to have control over a property or asset.