(Appendix 2B) Dunnings Woodworking Corporation produces fine cabinets. The company uses a job-order costing system in which its predetermined overhead rate is based on capacity. The capacity of the factory is determined by the capacity of its constraint, which is an automated router. Additional information is provided below for the most recent month:

-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?
A) $2,970
B) $2,541
C) $1,716
D) $4,257

Question

(Appendix 2B) Dunnings Woodworking Corporation produces fine cabinets. The company uses a job-order costing system in which its predetermined overhead rate is based on capacity. The capacity of the factory is determined by the capacity of its constraint, which is an automated router. Additional information is provided below for the most recent month:
 
-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?
A) $2,970 
B) $2,541 
C) $1,716 
D) $4,257

Quizplus · Accepted Answer

Predetermined overhead rate = Estimated total manufacturing overhead at capacity ÷ Estimated total amount of the allocation base at capacity = $11,880 ÷ 12,000 machine-hours = $0.99 per machine-hour
 11ea7761_1983_2705_81a5_2b2858628a3c_TB2580_00

(Appendix 2B) Dunnings Woodworking Corporation Produces Fine Cabinets