Question

Fusaro Corporation uses a predetermined overhead rate base on machine-hours that it recalculates at the beginning of each year. The company has provided the following data for themost recent year.Estimated total fixed manufacturing overhead fromthe beginning of the year $ 684,000Estimated activity level from the beginning of theyear 40,000 machine-hoursActual total fixed manufacturing overhead $ 616,000Actual activity level 37,700 machine-hoursThe amount of manufacturing overhead that would have been applied to all jobs during the period is closest to:A) $644,670B) $684,000C) $68,000D) $580,580

Answer 1

Answer:

The correct answer is A.

Explanation:

Giving the following information:

Fusaro Corporation uses a predetermined overhead rate base on machine-hours.

Estimated total fixed manufacturing overhead= $684,000

Estimated activity level= 40,000 machine-hours

Actual activity level 37,700 machine-hours

First, we need to calculate the predetermined overhead rate:

Estimated manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Estimated manufacturing overhead rate= 684,000/40,000= $17.1 per machine hour

Now, we can allocate the manufacturing overhead:

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

Allocated MOH= 17.1* 37,700= $644,670