Secrease Corporation Uses Machine-Hours as the Allocation Base for Applying

question 100

Multiple Choice

Secrease Corporation uses machine-hours as the allocation base for applying its manufacturing overhead.
$\begin{array}{|l|r|}\hline \begin{array}{l}\text { Estimated manufacturing overhead cost } \\\text { for the year }\end{array} & \$ 594,000 \\\hline \text { Capacity } & 110,000 \text { machine-hours } \\\hline\text { Estimated amount of the allocation base } \\\text { for the year }&108,000 \text { machine-hours }\\\hline \text { Amount of the allocation base for the } & 88,000 \text { machine-hours } \\\text { actual output of the year } & \\\hline \begin{array}{l}\text { Actual manufacturing overhead cost for } \\\text { the year }\end{array} & \$ 589,000 \\\hline\end{array}$ All of the company's manufacturing overhead is fixed.

- What is the predetermined overhead rate based on capacity to 2 decimal places?

• A) $5.35
• B) $6.69
• C) $5.50
• D) $5.40

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Definitions:

Average Run Length

In statistical process control, it is the expected number of samples taken until a control chart signals a possible shift in process parameters.

Control Chart

A tool used in process control to monitor, control, and identify the stability of a process over time.

Process

A series of actions or steps taken in order to achieve a particular end.

Statistical Process Control

A method used to monitor, control, and ensure the quality of processes by using statistical methods.