Sirmons Corporation bases its predetermined overhead rate on the estimated labor-hours for the upcoming year. At the beginning of the most recently completed year, the Corporation estimated the labor-hours for the upcoming year at 70,000 labor-hours. The estimated variable manufacturing overhead was $9.93 per labor-hour and the estimated total fixed manufacturing overhead was $1,649,200. The actual labor-hours for the year turned out to be 74,000 labor-hours. The predetermined overhead rate for the recently completed year was closest to:
A)$32.22
B)$9.93
C)$33.49
D)$23.56

Question

Quizplus · Accepted Answer

To calculate the predetermined overhead rate, we need to add the estimated variable manufacturing overhead and estimated fixed manufacturing overhead, and divide by the estimated labor-hours.

Predetermined overhead rate = (Estimated variable manufacturing overhead + Estimated fixed manufacturing overhead) / Estimated labor-hours

Predetermined overhead rate = ($9.93 per labor-hour x 70,000 labor-hours + $1,649,200) / 70,000 labor-hours 
Predetermined overhead rate = ($695,100 + $1,649,200) / 70,000 labor-hours 
Predetermined overhead rate = $2,344,300 / 70,000 labor-hours 
Predetermined overhead rate = $33.49 per labor-hour

Therefore, the closest choice to the predetermined overhead rate for the recently completed year is C) $33.49.

Sirmons Corporation Bases Its Predetermined Overhead Rate on the Estimated