Reamer 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 next year: Reamer estimates that 500 direct labor-hours and 1,000 machine-hours will be worked during the year. The predetermined overhead rate per hour will be:
A) $6.80 per machine-hour
B) $6.00 per machine-hour
C) $3.00 per machine-hour
D) $3.40 per machine-hour

Question

Reamer 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 next year:  Reamer estimates that 500 direct labor-hours and 1,000 machine-hours will be worked during the year. The predetermined overhead rate per hour will be:
A) $6.80 per machine-hour 
B) $6.00 per machine-hour 
C) $3.00 per machine-hour 
D) $3.40 per machine-hour

Quizplus · Accepted Answer

11eacbfc_c6f4_0832_8ffe_839cc0fc16d6_TB7552_00 Predetermined overhead rate = Estimated total manufacturing overhead ÷ Estimated total amount of the allocation base = $3,400 ÷ 1,000 machine-hours = $3.40 per machine-hour

Reamer Corporation Uses a Predetermined Overhead Rate Based on Machine-Hours