ers 2 to 4) 6 Help Save&Exit; The management of Holdaway Corporation would like

Question

ers 2 to 4) 6 Help Save&Exit; The management of Holdaway Corporation would like to investigate the possiblity of basing ts predetermined overthead rate on 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 79,000 machine-hours. Capacity is 88,000 machine-hours and the actual level of activity for the year is assumed to be 74,900 machine-hours. All of the manufacturing overhead is fixed and both the estimated amount at the beginning of the year and the actual amount at the end of the year are assumed to be $5,700640 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 overthead rate on capacity, then the predetermined overhead rate Multiple Choice $72.16 per machine-hour $70.38 per mechine-hour

Explanation / Answer

D.$64.78 per machine hour.

Predetermined overhead based on activity at capacity = total estimated overhead / capacity

=>$5,700,640 / 88,000 machine hours

=>$64.78 per machine hour.

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