Question

Ratzan Corporation uses a predetermined overhead rate based on machine-hours to apply manufacturing overhead to jobs. The Corporation has provided the following estimated costs for the next year: Direct labor: $15,750 Factory Supervisor Salary: $71,000 Indirect Materials: $12,100 Factory rent: $54,900 Factory utilities: $14,000 Direct Materials: $78,970 Depreciation on Factory equipment: $17,000 Ratzan estimates that 5,000 machine-hours will be worked during the year. The predetermined overhead rate per machine hour will be ____________.

Answer 1

Answer:

$33.80 per hour

Explanation:

The computation of the predetermined overhead rate is shown below:

= Estimated manufacturing overhead ÷ machine hours

= ($71,000 + $12,100 + $54,900 + $14,000 + $17,000) ÷ (5,000 machine hours)

= $169,000 ÷ 5,000 machine hours

= $33.80 per hour