Question

Steele Corporation uses a predetermined overhead rate based on machine-hours to apply manufacturing overhead to jobs. Steele Corporation has provided the following estimated costs for next year: Direct materials $ 20,000 Direct labor $ 60,000 Sales commissions $ 80,000 Salary of production supervisor $ 40,000 Indirect materials $ 8,000 Advertising expense $ 16,000 Rent on factory equipment $ 20,000 Steele estimates that 10,000 direct labor-hours and 16,000 machine-hours will be worked during the year. The predetermined overhead rate per hour will be____________.A) $10.25B)$4.25C) $9.00D)$8.00

Answer 1

Answer:

B)$4.25

Explanation:

Predetermined Overhead rate = Estimated Manufacturing overhead / Estimated Machine hours

Predetermined Overhead rate = $68,000 / 16,000 =$4.25 per unit

Machine-hours                            16,000

Manufacturing Overhead:

Salary of production supervisor $40,000

Indirect material                          $8,000

Rent on factory equipment       $20,000

Total Manufacturing overhead  $68,000