In: Accounting
Keeran Corporation estimates that its variable manufacturing overhead is $6.50 per machine-hour and its fixed manufacturing overhead is $280,080 per period. If the denominator level of activity is 7,200 machine-hours, the predetermined overhead rate would be:
Multiple Choice
$650.00 per machine-hour
$38.90 per machine-hour
$6.50 per machine-hour
$45.40 per machine-hour
Correct Answer $38.90 per machine Hour
Calculation of Predetermined Overhead rate |
||
(A) |
Fixed overheads |
$ 280,080.00 |
(B) |
Machine Hours |
7200 |
(A/B) |
Predetermined Overhead rate |
$ 38.90 |
Predetermined overhead rate is used to allocate Fixed overheads. Variable overheads will not be added to predetermine overhead. The rate comes to $38.90 per Machine Hour