Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Page 6 of 11 Problem 5 The management of Grainger Corporation would like to investigate the possibility of basing its predetermined overhead rate on activity
Page 6 of 11 Problem 5 The management of Grainger 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. Using the capacity level of activity as the base normally results in underapplied overhead. This amount could then be used to approximate the cost of idle resources (sometimes referred to as excess capacity). Of course, in order to comply with GAAP, the balance in the manufacturing overhead account would have to be assigned to products using an adjusting entry. 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. However, the engineering department estimates the maximum) capacity is 53,000 machine-hours. 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 amount 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 SUA-600, which required 40 machine-hours, is one of the jobs worked on during the year. Required: This question refers to Problem 5. Determine the predetermined overhead rate if the predetermined overhead rate is based on the estimated amount of the allocation base. (Round to the nearest $0.01) This question refers to Problem 5. Determine how much overhead would be applied to Job SUA-600 if the predetermined overhead rate is based on estimated amount of the allocation base. (Round to the nearest $1.00) This question refers to Problem 5. Determine the underapplied or overapplied overhead for the year if the predetermined overhead rate is based on the estimated amount of the allocation base. Ignore the sign of your answer. This question refers to Problem 5. Determine the predetermined overhead rate if the predetermined overhead rate is based on the amount of the allocation base at (maximum) capacity. (Round to the nearest $0.01) This question refers to Problem 5. Determine how much overhead would be applied to Job SUA-600 if the predetermined overhead rate is based on the amount of the allocation base at maximum) capacity. (Round to the nearest $1.00) This question refers to Problem 5. Determine the underapplied or overapplied overhead for the year if the predetermined overhead rate is based on the amount of the allocation base at (maximum) capacity
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started