Question

Valvano Corporation uses a job-order costing system with a single, plantwide, predetermined overhead rate based on machine-hours. The company based its predetermined overhead rate for the current year on a total fixed manufacturing overhead cost of $440,000, variable manufacturing overhead of $2.20 per machine-hour, and 50,000 machine-hours.
Required:
1. The estimated total manufacturing overhead is closest to ______________.

Answer 1

Answer:

The estimated total manufacturing overhead is closest to $550,000

Explanation:

Total manufacturing overhead = variable + fixed overhead absorbed

Fixed overhead absorbed = Overhead absorption rate × machine hour

Overhead absorption rate = Estimated overhead/Estimated machine hours

                               = $440,000/50,000 machine hours

                              = 8.8  per machine hour

Absorbed fixed overhead = $8.8 × 50,000= $440,000

Absorbed variable overhead= $2.20  × 50,000= $110000

Total manufacturing overhead = $440,000+ 110000 =$550,000

The estimated total manufacturing overhead is closest to $550,000