The Management of Keeter Corporation Would Like to Investigate the Possibility

question 21

Multiple Choice

The management of Keeter 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 89,000 machine-hours. In addition, capacity is 96,000 machine-hours and the actual level of activity for the year is 88,600 machine-hours. All of the manufacturing overhead is fixed and is $7,176,960 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 capacity,by how much was manufacturing overhead underapplied or overapplied?

• A)$553,224 Overapplied
• B)$32,256 Underapplied
• C)$32,256 Overapplied
• D)$553,224 Underapplied

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Definitions:

Psychoanalysis

A therapeutic approach originated by Sigmund Freud that seeks to explore the unconscious mind to understand and treat psychological disorders.

Psychological Laboratory

A controlled environment designed for conducting scientific research and experiments in psychology.

Leipzig

A city in eastern Germany, known for its cultural heritage, including music, and historically significant as a major center for the study of psychology.

Wilhelm Wundt

A German physiologist and psychologist who is recognized as the founder of experimental psychology and the first person to call himself a psychologist.