Tantanka Manufacturing Corporation uses a standard cost system with machine-hours as the activity base for overhead. The following information relates to production for last year: The standard machine-hours allowed for actual output during the year were 7,600. The actual machine-hours incurred were 7,500.
What did Tantanka use as a predetermined overhead rate for fixed manufacturing overhead?
A) $85.50 per machine-hour
B) $86.64 per machine-hour
C) $87.40 per machine-hour
D) $90.00 per machine-hour

Question

Tantanka Manufacturing Corporation uses a standard cost system with machine-hours as the activity base for overhead. The following information relates to production for last year:  The standard machine-hours allowed for actual output during the year were 7,600. The actual machine-hours incurred were 7,500.
What did Tantanka use as a predetermined overhead rate for fixed manufacturing overhead?
A) $85.50 per machine-hour 
B) $86.64 per machine-hour 
C) $87.40 per machine-hour 
D) $90.00 per machine-hour

Quizplus · Accepted Answer

Applied fixed manufacturing overhead = Predetermined overhead rate for fixed manufacturing overhead × Standard hours allowed for the actual output
$649,800 = Predetermined overhead rate for fixed manufacturing overhead × 7,600 hours
Predetermined overhead rate for fixed manufacturing overhead = $649,800 ÷ 7,600 hours = $85.50 per hour

Tantanka Manufacturing Corporation Uses a Standard Cost System with Machine-Hours