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

question 39

Multiple Choice

(Appendix 2B) 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 69,000 machine-hours. Capacity is 82,000 machine-hours and the actual level of activity for the year is assumed to be 72,400 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 $4,130,340 per year. It is assumed that a number of jobs were worked on during the year, one of which was Job Q20L which required 470 machine-hours.
-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) $57.05 per machine-hour
• B) $60.83 per machine-hour
• C) $59.86 per machine-hour
• D) $50.37 per machine-hour

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Definitions:

Normally Distributed

Describes a statistical distribution where data points are symmetrically distributed around the mean, showing a bell-shaped curve pattern.

Periodic Review Policy

A method of inventory control where stock levels are checked at fixed intervals and orders are placed accordingly.

CSL (Cycle Service Level)

An inventory management metric that measures the probability that the inventory level will not stock out within one replenishment cycle, typically expressed as a percentage.

Normally Distributed

Normally distributed refers to a statistical distribution where data is symmetrically distributed around the mean, forming a bell-shaped curve commonly seen in many natural and social phenomena.