Question

The company allocates manufacturing overhead using a single plantwide rate with machine hours as the allocation base. Estimated overhead costs for the year are $108,000. Additional estimated information is given below.
Normal Premium
Machine hours (MHr) 29,000 48,000
Direct materials $58,000 $440,000

Calculate the predetermined overhead allocation rate. (Round your answer to the nearest cent.)
A) $3.72 per direct labor hour
B) $1.40 per machine hour
C) $2.25 per machine hour
D) $0.22 per direct labor hour

Answer 1

Answer:

B) $1.40 per machine hour

Explanation:

Total machine hours = 29,000 + 48,000 = 77,000

Predetermined overhead allocation rate = Total estimated overhead costs / Total estimated quantity of the overhead allocation base

= $108,000 / 77,000 machine hours

= $1.40 per machine hour