Asked by Adarsh Prasad on May 29, 2024
Verified
Gilchrist Corporation bases its predetermined overhead rate on the estimated machine-hours for the upcoming year.At the beginning of the most recently completed year, the Corporation estimated the machine-hours for the upcoming year at 79,000 machine-hours.The estimated variable manufacturing overhead was $7.38 per machine-hour and the estimated total fixed manufacturing overhead was $2,347,090.The predetermined overhead rate for the recently completed year was closest to:
A) $37.09 per machine-hour
B) $36.07 per machine-hour
C) $7.38 per machine-hour
D) $29.71 per machine-hour
Predetermined Overhead Rate
A rate calculated before a period begins, used to allocate estimated overhead costs to products or services based on a certain activity base.
Variable Manufacturing Overhead
Costs that fluctuate with production volume, such as utilities for the manufacturing plant.
Fixed Manufacturing Overhead
The portion of fixed costs that is directly associated with the production process, including salaries of managers and factory maintenance.
- Estimate set overhead rates by applying different criteria such as machine-hours and labor-hours.
- Familiarize oneself with the procedure of distributing manufacturing overhead to distinct jobs via set overhead rates.
Verified Answer
Predetermined overhead rate = Estimated total manufacturing overhead ÷ Estimated total amount of the allocation base = $2,930,110 ÷ 79,000 machine-hours = $37.09 per machine-hour
Learning Objectives
- Estimate set overhead rates by applying different criteria such as machine-hours and labor-hours.
- Familiarize oneself with the procedure of distributing manufacturing overhead to distinct jobs via set overhead rates.
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