Question

Catherine B. is working with her production supervisor to compute a predetermined overhead ryte for the coming year. Catherine and her production supervisor have put together a budget of 1,400 direct labor hours for the coming year. During the same period, they plan to use 2,000 machine hours. Catherine has assembled the following information for the upcoming year:
Depreciation on factory equipment $100,000
Indirect labor payroll 14,000
Wages of factory Janitors 70,000
Sales supervisor salary 102,000
Utilities for factory 34,000
Rent on factory building 24,000
Factory insurance • 10,000
if Catherine decides to use a predetermined overhead rate based on machine hours, what would be the predetermined overhead rate (if necessary, round your answer)?
A $112/MH
B $180/MH
C $160/MH
D $126/MH

Answer 1

Answer:

Predetermined manufacturing overhead rate= $126 per machine-hour

Explanation:

Giving the following information:

Estimated machine-hours= 2,000

Depreciation on factory equipment $100,000

Indirect labor payroll 14,000

Wages of factory Janitors 70,000

Utilities for factory 34,000

Rent on factory building 24,000

Factory insurance  10,000

Total estimated overhead= $252,000

To calculate the predetermined overhead rate, we need to use the following formula:

Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Predetermined manufacturing overhead rate= 252,000/2,000

Predetermined manufacturing overhead rate= $126 per machine-hour