Question

Acton Corporation, which applies manufacturing overhead on the basis of machine-hours, has provided the following data for its most recent year of operations. Estimated manufacturing overhead $73,440 Estimated machine-hours 1,800 Actual manufacturing overhead $68,700 Actual machine-hours 1,710 The estimates of the manufacturing overhead and of machine-hours were made at the beginning of the year for the purpose of computing the company's predetermined overhead rate for the year. The applied manufacturing overhead for the year is closest to:
a. $67,689
b. $69,768
c. $68,407
d. $69,050

Answer 1

Answer:

option (b) $69,768

Explanation:

Data provided in question:

Estimated manufacturing overhead = $73,440

Estimated machine-hours = 1,800

Actual manufacturing overhead = $68,700

Actual machine-hours = 1,710

now,

The predetermined overhead rate = $\frac{\textup{Estimated manufacturing overhead}}{\textup{Estimated machine-hours}}$

or

The predetermined overhead rate = $\frac{\textup{73,440}}{\textup{1,800}}$

or

The predetermined overhead rate = $40.8 per hour

Therefore,

The applied manufacturing overhead for the year

=  Actual machine-hours × predetermined overhead rate

= 1,710 × $40.8

= $69,768

Hence,

the correct answer is option (b) $69,768