At the beginning of a year, a company predicts total direct materials costs of $1,020,000 and total overhead costs of $1,220,000

Question

2 years ago

8

At the beginning of a year, a company predicts total direct materials costs of $1,020,000 and total overhead costs of $1,220,000

. If the company uses direct materials costs as its activity base to apply overhead, what is the predetermined overhead rate it should use during the year

Business

1 answer:

Dima020 [189] · Answer 1 · 2022-08-06T22:47:03+03:00

Answer:

Predetermined manufacturing overhead rate= $1.961 per direct material dollar

Explanation:

Giving the following information:

At the beginning of a year, a company predicts total direct materials costs of $1,020,000 and total overhead costs of $1,220,000.

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

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

Predetermined manufacturing overhead rate= 1,220,000/1,020,000

Predetermined manufacturing overhead rate= $1.961 per direct material dollar