(Appendix 2B) Zackery Woodworking Corporation produces fine cabinets. The company uses a job-order costing system in which its predetermined overhead rate is based on capacity. The capacity of the factory is determined by the capacity of its constraint, which is an automated lathe. Additional information is provided below for the most recent month:

-If the company bases its predetermined overhead rate on capacity,then the predetermined overhead rate is closest to:
A) $72.16 per machine-hour
B) $70.38 per machine-hour
C) $76.11 per machine-hour
D) $64.78 per machine-hour

Question

(Appendix 2B) Zackery Woodworking Corporation produces fine cabinets. The company uses a job-order costing system in which its predetermined overhead rate is based on capacity. The capacity of the factory is determined by the capacity of its constraint, which is an automated lathe. Additional information is provided below for the most recent month:
 
-If the company bases its predetermined overhead rate on capacity,then the predetermined overhead rate is closest to:
A) $72.16 per machine-hour 
B) $70.38 per machine-hour 
C) $76.11 per machine-hour 
D) $64.78 per machine-hour

Quizplus · Accepted Answer

Predetermined overhead rate = Estimated total manufacturing overhead at capacity ÷ Estimated total amount of the allocation base at capacity = $5,700,640 ÷ 88,000 machine-hours = $64.78 per machine-hour

(Appendix 2B) Zackery Woodworking Corporation Produces Fine Cabinets