The management of Wrights Corporation would like to investigate the possibility of basing its predetermined overhead rate on activity at capacity rather than on the estimated amount of activity for the year. The company's controller has provided an example to illustrate how this new system would work. Estimated activity for the upcoming year 15,000machine-hoursCapacity 18,000machine-hoursActual activity for the year 15,800machine-hoursManufacturing overhead (all fixed)$43,200per year Required:a. Determine the predetermined overhead rate if the predetermined overhead rate is based on the estimated activity for the upcoming year.b. Determine the cost of unused capacity for the yearif the predetermined overhead rate is based on activity at capacity.
What will be an ideal response?
a.
Predetermined overhead rate = Estimated total manufacturing overhead ÷ Estimated total amount of the allocation base = $43,200 ÷ 15,000 MHs = $2.88 per MH
b.
Predetermined overhead rate = Estimated total manufacturing overhead ÷ Estimated total amount of the allocation base = $43,200 ÷ 18,000 MHs = $2.40 per MH
| Actual manufacturing overhead cost incurred | $ | 43,200 | |
| Manufacturing overhead applied to jobs: | |||
| Predetermined overhead rate | $ | 2.40 | per MH |
| Actual hours | 15,800 | MHs | |
| Manufacturing overhead applied to jobs | $ | 37,920 | |
| Cost of unused capacity | $ | 5,280 |
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A) the skills required by salespeople B) the number of salespeople C) the monetary reward to be given to salespeople D) the products allocated to the salespeople
Which cells have the wrong formula to calculate some items associated with the cash flows from operations?
I. cell B8
II. cell B9
III. cell B10
IV. cell B11
a) I and III
b) II and IV
c) I, II, and III
d) II, III, and IV
e) I, II, III, and IV