The Management of Bellon Corporation Would Like to Investigate the Possibility

question 17

Multiple Choice

The management of Bellon 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 23,000 machine-hours. In addition, capacity is 27,000 machine-hours and the actual level of activity for the year is 23,300 machine-hours. All of the manufacturing overhead is fixed and is $142,830 per year. For simplicity, it is assumed that this is the estimated manufacturing overhead for the year as well as the manufacturing overhead at capacity. It is further assumed that this is also the actual amount of manufacturing overhead for the year. A number of jobs were worked on during the year, one of which was Job P50E. This job required 160 machine-hours.
-If the company bases its predetermined overhead rate on capacity,the amount of manufacturing overhead charged to the job P50E is closest to:

• A)$1,029.41
• B)$993.60
• C)$846.40
• D)$980.81

---

Definitions:

Pure Monopoly

A market structure where a single supplier dominates the market, with no close substitutes for the product or service offered, leading to high control over prices.

Barriers to Entry

Economic, procedural, or regulatory obstacles that prevent new competitors from easily entering an industry or area of business.

Barriers to Entry

Obstacles that make it difficult for new firms to enter a market, such as high startup costs or stringent regulations.

X-inefficiency

The production of output, whatever its level, at a higher average (and total) cost than is necessary for producing that level of output.