The management of Aamot Corporation would like to investigate the possibility of
ID: 2489444 • Letter: T
Question
The management of Aamot 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 90,800 machine-hours. In addition, capacity is 100,000 machine-hours and the actual level of activity for the year is 90,350 machine-hours. All of the manufacturing overhead is fixed and is $6,976,164 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: (Round your answer to 2 decimal places.)
A. $76.83 per machine hour
B. $77.21 per machine hour
C. $69.76 per machine hour
D. $75.85 per machine hour
The management of Aamot 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 90,800 machine-hours. In addition, capacity is 100,000 machine-hours and the actual level of activity for the year is 90,350 machine-hours. All of the manufacturing overhead is fixed and is $6,976,164 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: (Round your answer to 2 decimal places.)
A. $76.83 per machine hour
B. $77.21 per machine hour
C. $69.76 per machine hour
D. $75.85 per machine hour
Explanation / Answer
Details Amt$ Estimated actual and full capacity manufacturing OH expense 6,976,164 Overhead allocation abse in full capacity machine hour Full Capacity Machine Hour = 100,000 So predetermined overhead rate =Total OH expense/100000= $ 69.76 So correct option is C . $69.76 per machine hour.
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