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

question 2

Multiple Choice

(Appendix 4B) The management of Cordona 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 27, 000 machine-hours.In addition, capacity is 33, 000 machine-hours and the actual level of activity for the year is 27, 900 machine-hours.All of the manufacturing overhead is fixed and is $231, 660 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 I86N.This job required 370 machine-hours. If the company bases its predetermined overhead rate on capacity, the predetermined overhead rate is closest to:

• A)$8.30
• B)$7.02
• C)$8.74
• D)$8.58

---

Definitions:

Chemical Reactions

Processes that involve the rearrangement of molecular or ionic structure of substances, resulting in the formation of one or more new products.

Matter

Anything that occupies space and has mass, composed of atoms and molecules and existing in solid, liquid, gas, or plasma states.

Cell Nucleus

The organelle in a cell that contains most of the cell's genetic material, responsible for regulating cell activities.

DNA

Deoxyribonucleic acid, a molecule that carries the genetic instructions used in the growth, development, functioning, and reproduction of all known living organisms and many viruses.