Asked by Yasmin Garcia on May 27, 2024
Verified
Lupo Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on machine-hours. The company based its predetermined overhead rate for the current year on the following data: Recently, Job T687 was completed with the following characteristics:
The predetermined overhead rate is closest to:
A) $12.60 per machine-hour
B) $10.50 per machine-hour
C) $8.40 per machine-hour
D) $2.10 per machine-hour
Predetermined Overhead Rate
An estimated rate used to allocate manufacturing overhead costs to individual products or job orders, based on a certain activity base.
Machine-Hours
A measure of production output or activity based on the number of hours machines are operated in the manufacturing process.
Job-Order Costing System
An accounting method used to accumulate and assign costs to custom or unique products or jobs.
- Compute and comprehend the significance of pre-established overhead rates within job-order costing systems.
Verified Answer
Total estimated overhead costs = $420,000 + $140,000 = $560,000
Total estimated machine-hours = 40,000 + 20,000 = 60,000
Predetermined overhead rate = $560,000 / 60,000 machine-hours = $9.33 per machine-hour
Therefore, the closest answer is B) $10.50 per machine-hour.
Learning Objectives
- Compute and comprehend the significance of pre-established overhead rates within job-order costing systems.
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