Danaher Woodworking Corporation produces fine furniture. The company uses a job-order costing system in which its predetermined overhead rate is based on capacity. The capacity of the factory is determined by the capacity of its constraint, which is an automated lathe. Additional information is provided below for the most recent month:?Estimates at the beginning of the month:???Estimated total fixed manufacturing overhead$22,701??Capacity of the lathe230 hours?Actual results:???Actual total fixed manufacturing overhead$22,701??Actual hours of lathe use210hoursRequired:a. Calculate the predetermined overhead rate based on capacity.b. Calculate the manufacturing overhead applied.c. Calculate the cost of unused capacity.
What will be an ideal response?
a.
| ? | Estimated total fixed manufacturing overhead | $22,701 | ? |
| ? | Estimated activity level | 230 | hours |
| ? | Predetermined overhead rate | $98.70 | per hour |
b. Manufacturing overhead applied = 210 hours × $98.70 per hour = $20,727
c. Cost of unused capacity = (230 hours ? 210 hours) × $98.70 per hour = $1,974
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