Reference no: EM132661445

Analysis of plant capacity and application of overhead.Annual theoretical capacity of 5,000 machine hours.

Practical capacity of 85% of theoretical capacity.

Estimated manufacturing overhead $600,000 .

Expected capacity usage 80% of practical capacity.

At the end of the year

Actual manufacturing overhead $550,000.

Actual capacity usage 3,000 machine hours.

Problem 1: Which of the following statements is true at the end of the year?

a) Manufacturing overhead is underapplied by $50,000, and unplanned idle capacity cost is $176,471.

b) Planned idle capacity cost is $120,000, and manufacturing overhead spending is $176,471 more than budget.

c) Manufacturing overhead is underapplied by $126,471, and unplanned idle capacity cost is $56,471.

d) Planned idle capacity cost is $423,529, and manufacturing overhead spending is $50,000 less than budget.