Asked by TRISHA MARTINEZ on Jul 11, 2024
Verified
What is the company's current predetermined overhead rate?
A) $9.06
B) $56.63
C) $22.65
D) $37.75
Predetermined Overhead Rate
An estimated rate used to allocate manufacturing overhead costs to individual products based on a certain activity base, such as labor hours or machine hours.
- Calculate predetermined overhead rates and activity rates.
Verified Answer
ZH
Zainab HusainJul 18, 2024
Final Answer :
C
Explanation :
The predetermined overhead rate is calculated by dividing the estimated total manufacturing overhead cost by the estimated total amount of the allocation base. Therefore, to calculate the predetermined overhead rate we have to divide the estimated overhead cost for the year ($1,133,333) by the estimated total amount of the allocation base (50,000 machine-hours). So, predetermined overhead rate = $1,133,333 ÷ 50,000 = $22.65 per machine-hour. Therefore, the current predetermined overhead rate is $22.65.
Learning Objectives
- Calculate predetermined overhead rates and activity rates.