The management of Holdaway 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 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 $5,700,640 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, what would be the cost of unused capacity reported on the income statement prepared for internal management purposes? Multiple Choice $295,856 $848,618 $552,762 $583,020
The management of Holdaway 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 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 $5,700,640 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, what would be the cost of unused capacity reported on the income statement prepared for internal management purposes? Multiple Choice $295,856 $848,618 $552,762 $583,020
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter4: Activity-based Costing
Section: Chapter Questions
Problem 3CMA: Young Company is beginning operations and is considering three alternatives to allocate...
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![The management of Holdaway 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 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 $5,700,640 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, what would be the cost of unused capacity reported on the income statement prepared for internal management purposes?
Multiple Choice
$295,856
$848,618
$552,762
$583,020](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F6275bc29-4f32-46da-9403-2928cd4fe821%2F43b2dc92-d123-47a2-9497-49e27ac65b80%2F7bwrofg_processed.png&w=3840&q=75)
Transcribed Image Text:The management of Holdaway 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 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 $5,700,640 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, what would be the cost of unused capacity reported on the income statement prepared for internal management purposes?
Multiple Choice
$295,856
$848,618
$552,762
$583,020
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