The Management of Mcneff Corporation Would Like to Investigate the Possibility

Multiple Choice

The management of Mcneff 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. $\begin{array}{lrrr}&\text { Estimated}\\&\text { at the}\\&\text { Beginning}\\&\text { of the Year}& \text { Capacity}& \text { Actual }\\\text { Machine-hours ............. } & 81,000 & 87,000 & 81,400 \\\text { Manufacturing overhead .... } & \$ 5,496,660 & \$ 5,496,660 & \$ 5,496,660\end{array}$
If the company bases its predetermined overhead rate on capacity,by how much was manufacturing overhead underapplied or overapplied?

A) $27,144 Underapplied
B) $353,808 Underapplied
C) $27,144 Overapplied
D) $353,808 Overapplied