(Appendix 4B)The Management of Aamot Corporation Would Like to Investigate

question 22

Multiple Choice

(Appendix 4B) The management of Aamot 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 43, 000 machine-hours.In addition, capacity is 47, 000 machine-hours and the actual level of activity for the year is 42, 100 machine-hours.All of the manufacturing overhead is fixed and is $828, 610 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. If the company bases its predetermined overhead rate on the estimated amount of the allocation base for the upcoming year, the predetermined overhead rate is closest to:

• A)$19.68
• B)$19.27
• C)$19.14
• D)$17.63

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Definitions:

Punctuated Equilibrium

A theory in evolutionary biology that proposes that species evolve rapidly during short periods of drastic change, followed by long periods of stasis.

Midpoint Transition

A concept in project or task management indicating a significant phase of transition or shift in focus, often halfway through the process.

Group Development

The phases through which a group progresses, from formation to maturity, affecting its structure and function.

Conflict

A serious disagreement or argument, typically a prolonged one, that can occur between individuals, groups, or nations.