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The Management of Wymer Corporation Would Like to Investigate the Possibility

question 5

Multiple Choice

The management of Wymer 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 50,000 machine-hours. In addition, capacity is 59,000 machine-hours and the actual level of activity for the year is 53,300 machine-hours. All of the manufacturing overhead is fixed and is $1,622,500 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 J44V. This job required 230 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?

Grasp the basic concepts of income, expenses, and profit in accounting.

Recognize the differences in accounting standards between FASB and IASB.

Understand the roles and types of accountants in business.

Understand the roles and responsibilities of managerial accountants.

Definitions:

Simple Interest

Simple interest is a way of calculating interest where the amount earned or paid is based on the original principal and does not compound.

Face Value

The nominal or dollar value printed on a security or financial instrument, such as a bond or stock certificate.

Interest Rate

The percentage of a loan that is incurred as interest by the borrower, usually represented as an annual percentage of the outstanding loan amount.

Non-Interest-Bearing

Describes a financial instrument that does not generate interest income for the holder.