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:

Customers

Individuals or entities that purchase goods or services from a business, playing a key role in the company's success.

Conscious Marketing

Ethical marketing practices that consider the welfare of society and the environment in decision-making.

Stakeholders

Individuals or groups that have an interest in any decision or activity of a business, including employees, customers, suppliers, and investors.

Interdependence

A mutual reliance between two or more entities, where each is dependent on the other for success or survival.