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

question 1

Multiple Choice

(Appendix 4B) The management of Benedict 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 29, 000 machine-hours.In addition, capacity is 36, 000 machine-hours and the actual level of activity for the year is 26, 600 machine-hours.All of the manufacturing overhead is fixed and is $334, 080 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 B04D.This job required 150 machine-hours. If the company bases its predetermined overhead rate on the estimated amount of the allocation base for the upcoming year, by how much was manufacturing overhead underapplied or overapplied?

• A)$87, 232 Underapplied
• B)$27, 648 Underapplied
• C)$27, 648 Overapplied
• D)$87, 232 Overapplied

---

Definitions:

IP Addresses

Numerical labels assigned to each device connected to a computer network that uses the Internet Protocol for communication.

Computer

An electronic device capable of processing, storing, and executing instructions to perform tasks.

TCP/IP Suite Protocols

A set of communications protocols used for the Internet and other similar networks.

SMTP

Simple Mail Transfer Protocol, a standard for email transmission across the Internet.