Reference no: EM132661413
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.