Asked by Na'Diamond Swain on May 29, 2024
Verified
Dallman 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 70,000 machine-hours, total fixed manufacturing overhead cost of $287,000, and a variable manufacturing overhead rate of $3.50 per machine-hour.
Required:
a.Calculate the estimated total manufacturing overhead for the year.
b.Calculate the predetermined overhead rate for the year.
Predetermined Overhead Rate
This rate is calculated before a period begins and is used to apply overhead costs to products based on a selected activity base.
Job-Order Costing
A cost accounting system used to allocate costs to specific jobs or batches, useful for unique or custom orders.
Machine-Hours
A measure of production time, referring to the total hours a machine is operated within a specific period.
- Calculate the comprehensive manufacturing overhead for both departments and entire plants.
- Acquire knowledge about the differentiation between variable and fixed manufacturing overhead charges and their influence on calculating overhead rates.
- Determine and recognize the value of establishing predetermined overhead rates across the entire organization.
Verified Answer
b.Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base = $532,000 ÷ 70,000 machine-hours = $7.60 per machine-hour
Learning Objectives
- Calculate the comprehensive manufacturing overhead for both departments and entire plants.
- Acquire knowledge about the differentiation between variable and fixed manufacturing overhead charges and their influence on calculating overhead rates.
- Determine and recognize the value of establishing predetermined overhead rates across the entire organization.
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