Billa Corporation bases its predetermined overhead rate on variable manufacturing overhead cost of $11.70 per machine-hour and fixed manufacturing overhead cost of $341,596 per period.If the denominator level of activity is 4,700 machine-hours,the predetermined overhead rate would be:
A) $11.70
B) $72.68
C) $84.38
D) $1,170.00

Question

Quizplus · Accepted Answer

Fixed component of predetermined overhead rate = Estimated total fixed manufacturing overhead cost ÷ Estimated total amount of the allocation base
= $341,596 ÷ 4,700 machine-hours = $72.68 per machine-hour
Predetermined overhead rate = $11.70 per machine-hour + $72.68 per machine-hour = $84.38 per machine-hour

Billa Corporation Bases Its Predetermined Overhead Rate on Variable Manufacturing