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: 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) $4.25
B) $8.00
C) $9.00
D) $10.25

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:  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) $4.25 
B) $8.00 
C) $9.00 
D) $10.25

Quizplus · Accepted Answer

11eacbfc_c6f5_40b8_8ffe_47adca6ed66a_TB7552_00 Predetermined overhead rate = Estimated total manufacturing overhead ÷ Estimated total amount of the allocation base
Predetermined overhead rate = $68,000 ÷ 16,000 machine-hours = $4.25 per machine-hour

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