Calculate the cost of unused capacity

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Reference no: EM132218569

Question - The management of Kennedy 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, using machine-hours as the allocation base.

	Estimated	Capacity	Actual
Machine hours	50,000	53,000	49,000 MHs
MOH	$1,855,000	$1,855,000	$1,855,000

If the Corporation bases its predetermined overhead rate on capacity, then as shown on the income statement prepared for internal management purposes, the cost of unused capacity would be closest to:

A. $148,400

B. $105,000

C. $140,000

D. $111,300

E. None of the above

Reference no: EM132218569

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