Question

Gilchrist Corporation bases its predetermined overhead rate on the estimated machine-hours for the upcoming year. At the beginning of the most recently completed year, the Corporation estimated the machine-hours for the upcoming year at 79,000 machine-hours. The estimated variable manufacturing overhead was $7.38 per machine-hour and the estimated total fixed manufacturing overhead was $2,347,090. The predetermined overhead rate for the recently completed year was closest to:
A) $37.09 per machine-hour
B) $36.07 per machine-hour
C) $7.38 per machine-hour
D) $29.71 per machine-hour

Answer 1

Answer:

The correct answer is A.

Explanation:

Giving the following information:

The estimated machine-hours for the upcoming year at 79,000 machine-hours.

The estimated variable manufacturing overhead was $7.38 per machine-hour

The estimated total fixed manufacturing overhead was $2,347,090.

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= 2,347,090/79,000 + 7.38= $37.09 per machine-hour