The Management of Mcneff Corporation Would Like to Investigate the Possibility

question 13

Multiple Choice

The management of Mcneff 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. $\begin{array}{lrrr}&\text { Estimated}\\&\text { at the}\\&\text { Beginning}\\&\text { of the Year}& \text { Capacity}& \text { Actual }\\\text { Machine-hours ............. } & 81,000 & 87,000 & 81,400 \\\text { Manufacturing overhead .... } & \$ 5,496,660 & \$ 5,496,660 & \$ 5,496,660\end{array}$
If the company bases its predetermined overhead rate on capacity,by how much was manufacturing overhead underapplied or overapplied?

• A)$27,144 Underapplied
• B)$353,808 Underapplied
• C)$27,144 Overapplied
• D)$353,808 Overapplied

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Definitions:

President Harry S. Truman

The 33rd President of the United States, serving from 1945 to 1953, notable for ordering the use of atomic bombs on Japan and implementing the Marshall Plan to rebuild Europe after World War II.

Executive Order

A directive issued by the president or a governor that has the force of law, typically without the need for legislative approval.

Racial Segregation

The enforced separation of different racial groups within a community, institution, or country.

Armed Forces

The military forces of a country, including the army, navy, air force, and other branches.