The Management of Hendren Corporation Would Like to Investigate the Possibility

question 19

Essay

The management of Hendren Corporation would like to investigate the possibility of basing its predetermined overhead rate on activity at capacity rather than on the estimated amount of activity for the year. 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 10,000 machine-hours. In addition, capacity is 12,000 machine-hours and the actual activity for the year is 10,100 machine-hours. All of the manufacturing overhead is fixed and is $12,000 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 and the actual amount of manufacturing overhead for the year. Job A76W, which required 420 machine-hours, is one of the jobs worked on during the year.
Required:
a. Determine the predetermined overhead rate if the predetermined overhead rate is based on the amount of the allocation base at capacity.
b. Determine how much overhead would be applied to Job A76W if the predetermined overhead rate is based on the amount of the allocation base at capacity.
c. Determine the underapplied or overapplied overhead for the year if the predetermined overhead rate is based on the amount of the allocation base at capacity.

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Definitions:

Eject Blood

The process of forcefully expelling blood from the heart chambers, primarily during systole.

Papillary Muscles

Muscle projections from the ventricular walls of the heart that attach to the chordae tendineae and prevent inversion of the valves during contraction.

Atria Contraction

The process during the cardiac cycle where the atria chambers of the heart contract to move blood into the ventricles.

Pulse Pressure

The difference between systolic and diastolic blood pressure, indicating the force that the heart generates each time it contracts.