The Management of Buelow Corporation Would Like to Investigate the Possibility

Essay

The management of Buelow 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. The company's controller has provided an example to illustrate how this new system would work.
Job Q58A, which required 130 machine-hours, is one of the jobs worked on during the year.
Required:
a. Determine the predetermined overhead rate if the predetermined overhead rate is based on the estimated activity for the upcoming year.
b. Determine how much overhead would be applied to Job Q58A if the predetermined overhead rate is based on estimated activity for the upcoming year.
c. Determine the predetermined overhead rate if the predetermined overhead rate is based on the activity at capacity.
d. Determine how much overhead would be applied to Job Q58A if the predetermined overhead rate is based on activity at capacity.
e. Determine the cost of unused capacity for the year if the predetermined overhead rate is based on activity at capacity.