Corporation bases its predetermined overhead rate on variable manufacturing over
ID: 2592782 • Letter: C
Question
Corporation bases its predetermined overhead rate on variable manufacturing overthead comina and fixed manufacturing overhead cost of $947,672 per period. If 12. Hairr $9.50 per machine-hour level of activity is 8,900 machine-hours, what would the predetermined overhead rate be? A. $115.98 B. $9.50 C. $950.00 D. $106.48 denominator 13. Claris Corporation (a multi-product company) produces and sells 7,000 units of Product X each year Each unit of Product X sells for $12 and has a contribution margin of $4. If Product X is discontinued, S19,000 of the $32,000 in fixed costs charged to Product X could be eliminated. If Product X is discontinued, what will happen to the company's overall operating income? A. Decrease by $9,000 per year B. Increase by $9,000 per year C. Decrease by 4,000 per year D. Increase by $4,000 per year
Explanation / Answer
12 Predetremined overheads Variable 84550 (8900*9.5) Fixed overheads 947672 Total overheads 1032222 Machine hours 8900 Predetremined overhead rate 115.98 (1032222/8900) 13 Before After Difference Contribution margin 28000 0 -28000 Fixed cost 32000 13000 19000 Operating income -4000 -13000 -9000 So operating income will decrease by 9000