Question

Strong Company applies overhead based on machine hours. At the beginning of 20x1, the company estimated that manufacturing overhead would be $500,000, and machine hours would total 20,000. By 20x1 year-end, actual overhead totaled $525,000, and actual machine hours were 25,000. On the basis of this information, the 20x1 predetermined overhead rate was:
Select one:

a. $0.04 per machine hour

b. $0.05 per machine hour

c. $20 per machine hour

d. $21 per machine hour

e. $25 per machine hour

Answer 1

Answer:

The correct answer is E.

Explanation:

Giving the following information:

At the beginning of 20x1, the company estimated that manufacturing overhead would be $500,000, and machine hours would total 20,000.

To calculate the estimated manufacturing overhead rate we need to use the following formula:

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

Estimated manufacturing overhead rate= 500,000/20,000= $25 per machine hour.