Beta Company Uses a Predetermined Overhead Rate Based on Machine

question 36

Multiple Choice

Beta Company uses a predetermined overhead rate based on machine hours to allocate manufacturing overhead to jobs.The company estimated that it would incur $600,000 of manufacturing overhead during the year and that 250,000 machine hours would be used.During the year,the company actually incurred manufacturing overhead costs of $582,000 and 240,000 machine hours were used.
By how much was manufacturing overhead overallocated or underallocated for the year?

• A)$6,000 overallocated
• B)$6,000 undererallocated
• C)$18,000 underallocated
• D)$18,000 overallocated

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Definitions:

Dividend

A portion of a company's earnings distributed to shareholders, usually in the form of cash or additional shares.

Jensen Measure

A performance metric that calculates the excess return of a portfolio over the predicted return by the Capital Asset Pricing Model (CAPM).

Risk-Free Return

The return on an investment with no risk of financial loss, typically associated with government bonds.

Treynor Measure

A performance metric on investment funds that accounts for the risk taken by the investment relative to the market risk as measured by beta.