The management of Wy 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 50,000 machine-hours. In addition, capacity is 59,000 machine-hours and the actual level of activity for the year is 53,300 machine-hours. All of the manufacturing overhead is fixed and is P1,622,500 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 products were worked on during the year, one of which was Product X. This product required 230 machine-hours. 22. If the company bases its predetermined overhead rate on the estimated amount of the allocation base for the upcoming year, by how much was manufacturing overhead underapplied or overapplied? A. P156,750 Overapplied B. P107,085 Overapplied C. P107,085 Underapplied D. P156,750 Underapplied
The management of Wy Corporation would like to investigate the possibility of basing its predetermined
machine-hours and the estimated amount of the allocation base for the upcoming year is 50,000 machine-hours. In addition, capacity is 59,000 machine-hours and the actual level of activity for the year is 53,300 machine-hours. All of the manufacturing overhead is fixed and is P1,622,500 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 products were worked on during the year, one of which was Product X. This product required 230 machine-hours.
22. If the company bases its predetermined overhead rate on the estimated amount of the allocation base for the upcoming year, by how much was manufacturing overhead underapplied
or overapplied?
A. P156,750 Overapplied
B. P107,085 Overapplied
C. P107,085 Underapplied
D. P156,750 Underapplied
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