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17. If the company bases its predetermined overhead rate on capacity, the amount of
manufacturing overhead charged to the job P50E is closest to:
18. If the company bases its predetermined overhead rate on capacity, by how much was
manufacturing overhead underapplied or overapplied?
The management of Bow 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 54,000
machine-hours. In addition, capacity is 68,000 machine-hours and the actual level of activity for
the year is 53,100 machine-hours. All of the manufacturing overhead is fixed and is $2,129,760
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 E82X. This job required 100 machine-hours.
19. If the company bases its predetermined overhead rate on capacity, the predetermined
overhead rate is closest to:
20. If the company bases its predetermined overhead rate on capacity, the amount of
manufacturing overhead charged to the job E82X is closest to:
21. If the company bases its predetermined overhead rate on capacity, by how much was
manufacturing overhead underapplied or overapplied?
22. The management of Svatek 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. In this example, the allocation base is machine-hours and the estimated
amount of the allocation base for the upcoming year is 16,000 machine-hours. In addition,
capacity is 20,000 machine-hours and the actual activity for the year is 17,800 machine-hours. All
of the manufacturing overhead is fixed and is $51,200 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 and the actual amount of manufacturing overhead for the year.
Required:
Determine the underapplied or overapplied manufacturing overhead for the year if the
predetermined overhead rate is based on the amount of the allocation base at capacity.
4A-22
23. The management of Rainha 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. In this example, the allocation base is machine-hours and the estimated
amount of the allocation base for the upcoming year is 13,000 machine-hours. In addition,
capacity is 16,000 machine-hours and the actual activity for the year is 12,900 machine-hours. All
of the manufacturing overhead is fixed and is $29,120 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 and the actual amount of manufacturing overhead for the year.
Required:
a. Determine the predetermined overhead rate if the predetermined overhead rate is based on
the amount of the allocation base at capacity.
b. Determine the underapplied or overapplied manufacturing overhead for the year if the
predetermined overhead rate is based on the amount of the allocation base at capacity.
4A-23
24. The management of Scurlock 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. In this example, the allocation base is machine-hours and the
estimated amount of the allocation base for the upcoming year is 19,000 machine-hours. In
addition, capacity is 21,000 machine-hours and the actual activity for the year is 18,200 machine-
hours. All of the manufacturing overhead is fixed and is $71,820 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 and the actual amount of manufacturing overhead for the
year.
Required:
a. Determine the predetermined overhead rate if the predetermined overhead rate is based on
the estimated amount of the allocation base.
b. Determine the underapplied or overapplied manufacturing overhead for the year if the
predetermined overhead rate is based on the estimated amount of the allocation base.
c. Determine the predetermined overhead rate if the predetermined overhead rate is based on
the amount of the allocation base at capacity.
d. Determine the underapplied or overapplied manufacturing overhead for the year if the
predetermined overhead rate is based on the amount of the allocation base at capacity.
4A-25
25. The management of Gruwell 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. In this example, the allocation base is machine-hours and the
estimated amount of the allocation base for the upcoming year is 48,000 machine-hours. In
addition, capacity is 53,000 machine-hours and the actual activity for the year is 47,700 machine-
hours. All of the manufacturing overhead is fixed and is $1,144,800 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 and the actual amount of manufacturing overhead for the
year. Job J42O, which required 40 machine-hours, is one of the jobs worked on during the year.
Required:
a. Determine the predetermined overhead rate if the predetermined overhead rate is based on
the estimated amount of the allocation base.
b. Determine how much overhead would be applied to Job J42O if the predetermined overhead
rate is based on estimated amount of the allocation base.
c. Determine the underapplied or overapplied manufacturing overhead for the year if the
predetermined overhead rate is based on the estimated amount of the allocation base.
d. Determine the predetermined overhead rate if the predetermined overhead rate is based on
the amount of the allocation base at capacity.
e. Determine how much overhead would be applied to Job J42O if the predetermined overhead
rate is based on the amount of the allocation base at capacity.
f. Determine the underapplied or overapplied manufacturing overhead for the year if the
predetermined overhead rate is based on the amount of the allocation base at capacity.
4A-27
26. The management of Niemeyer 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. In this example, the allocation base is machine-hours and the
estimated amount of the allocation base for the upcoming year is 70,000 machine-hours. In
addition, capacity is 82,000 machine-hours and the actual activity for the year is 72,900 machine-
hours. All of the manufacturing overhead is fixed and is $4,132,800 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 and the actual amount of manufacturing overhead for the
year. Job O65A, which required 300 machine-hours, is one of the jobs worked on during the year.
Required:
a. Determine the predetermined overhead rate if the predetermined overhead rate is based on
the amount of the allocation base at capacity.
b. Determine how much overhead would be applied to Job O65A if the predetermined overhead
rate is based on the amount of the allocation base at capacity.
c. Determine the underapplied or overapplied manufacturing overhead for the year if the
predetermined overhead rate is based on the amount of the allocation base at capacity.
4A-28
27. The management of Trew 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. In this example, the allocation base is machine-hours and the estimated
amount of the allocation base for the upcoming year is 37,000 machine-hours. In addition,
capacity is 46,000 machine-hours and the actual activity for the year is 36,900 machine-hours. All
of the manufacturing overhead is fixed and is $697,820 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 and the actual amount of manufacturing overhead for the year.
Required:
a. Determine the underapplied or overapplied manufacturing overhead for the year if the
predetermined overhead rate is based on the estimated amount of the allocation base.
b. Determine the underapplied or overapplied manufacturing overhead for the year if the
predetermined overhead rate is based on the amount of the allocation base at capacity.
