The Management of Haigler Corporation Would Like to Investigate the Possibility

question 16

Multiple Choice

The management of Haigler 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 64,000 machine-hours. In addition, capacity is 80,000 machine-hours and the actual level of activity for the year is 66,300 machine-hours. All of the manufacturing overhead is fixed and is $3,788,800 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, the predetermined overhead rate is closest to:

• A) $47.36
• B) $53.82
• C) $59.20
• D) $57.15

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Definitions:

John Maynard Keynes

A British economist whose theories on the causes of prolonged unemployment and the importance of governmental fiscal and monetary policies founded Keynesian economics.

Federal Budget Deficit

The shortfall that occurs when the U.S. government's expenditures exceed its revenues within a fiscal year.

GDP

Gross Domestic Product, or GDP, represents the overall market value of all ultimate goods and services manufactured domestically in a specific timeframe.

Interest Rates

The cost of borrowing money or the return on investment for savings, usually expressed as a percentage of the total amount loaned or deposited.