Question

1. Peking Corp.'s cost accountant is planning the year-end review of production costs. One of the areas for review is the analysis of plant capacity and application of overhead. Peking's plant has an annual theoretical capacity of 5,000 machine hours. However, the plant manager has determined that practical capacity of 80% of theoretical capacity is the best measure of capacity usage. At the beginning of the year, the budget committee had determined the following: Estimated manufacturing overhead Expected capacity usage At the end of the year, the cost accountant was able to determine the following: $600,000 85% of practical capacity Actual manufacturing overhead Actual capacity usage $550,000 3,000 machine hours 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 is $282,353 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 is $56,471 d) Planned idle capacity cost is $423,529 and manufacturing overhead spending is $50,000 less than budget.

Answer 1

naatio and vena esies o Peki and The no of ho0 . The Cosof idle Cafaci is 801. ot 600,000 120,000