Question

Paulson Company uses a predetermined overhead rate based on machine hours to apply manufacturing overhead to jobs. The company has provided the following estimated costs for next year: Direct materials................................................................................................ $25,000 ........ Direct labor .............................................................................................................. 22,000 Advertising expense................................................................................................ 15,000. Rent on factory building .......................................................................................... 13,500 Depreciation on factory equipment................................................................6,500 .......... Indirect materials ................................................................................................ 10,000..... Sales salaries................................................................................................28,000 ............ Insurance on factory equipment............................................................................... 12,000 Paulson estimated that 40,000 direct labor hours and 20,000 machine hours would be worked during the year. The predetermined overhead rate per machine hour will be:

Answer 1

Answer:

predetermined overhead rate per machine hour $2.10

Explanation:

$\frac{Cost\: Of \:Manufacturing \:Overhead}{Cost \:Driver}= Overhead \:Rate$

The overhead rate will be calculate as the sum of the expected cost divide by a cost driver in this case; machine hours

Overhead expected cost:

rent on factory building                     13,500

depreciation on factory equipment   6,500

indirect materials                               10,000

insuance on factory equipment       12,000  

Total overhead                                 42,000

machine hours 20,000

42,000 / 20,000 = 2.10