The Management of Pundt Corporation Would Like to Investigate the Possibility

question 2

Multiple Choice

The management of Pundt 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 15,000 machine-hours. In addition, capacity is 19,000 machine-hours and the actual level of activity for the year is 15,100 machine-hours. All of the manufacturing overhead is fixed and is $45,600 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 K41P. This job required 140 machine-hours.
-If the company bases its predetermined overhead rate on capacity, the predetermined overhead rate is closest to:

• A) $2.40
• B) $3.02
• C) $3.04
• D) $2.78

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Definitions:

Interdependence

A mutual reliance among members of a group or system, where the actions of each individual can affect the whole.

Close Relationships

Emotional bonds between individuals characterized by affection, trust, and mutual support.

Reciprocity

A social principle where interactions are based on mutual exchange, influencing the dynamics of social relationships and transactions.

Give-And-Take

A principle of mutual exchange, compromise, or negotiation, where individuals participate in reciprocal giving and receiving to reach a mutually beneficial outcome.