The Management of Baggerly Corporation Would Like to Investigate the Possibility

question 11

Multiple Choice

The management of Baggerly 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 81,000 machine-hours. In addition, capacity is 95,000 machine-hours and the actual level of activity for the year is 84,900 machine-hours. All of the manufacturing overhead is fixed and is $6,617,700 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, by how much was manufacturing overhead underapplied or overapplied?

• A) $318,630 Overapplied
• B) $703,566 Underapplied
• C) $703,566 Overapplied
• D) $318,630 Underapplied

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Definitions:

Biological Perspective

An approach in psychology that examines psychological disorders and behaviors from a biological standpoint, including genetics and neurochemistry.

Anxiety

A feeling of worry, nervousness, or unease about something with an uncertain outcome.

Chemical Imbalance

A term often used to describe a theory that certain psychiatric disorders are caused by an imbalance of chemicals in the brain, particularly neurotransmitters.

Learning Perspective

A psychological approach that emphasizes the effects of experience on behavior, suggesting that learning from the environment is key to understanding human and animal behavior.