Odonell Corporation estimates that its variable manufacturing overhead is $11.20 per machine-hour and its fixed manufacturing overhead is $563,640 per period. If the denominator level of activity is 6,000 machine-hours, the fixed component in the predetermined overhead rate would be:
A)$1,120.00 per machine-hour
B)$11.20 per machine-hour
C)$93.94 per machine-hour
D)$105.14 per machine-hour

Question

Quizplus · Accepted Answer

The predetermined overhead rate is calculated as follows:

Predetermined Overhead Rate = (Variable Manufacturing Overhead + Fixed Manufacturing Overhead) / Denominator Level of Activity

= ($11.20 per machine-hour * 6,000 machine-hours) + $563,640 / 6,000 machine-hours

= $67,200 + $563,640 / 6,000 machine-hours

= $93.94 per machine-hour

Therefore, the fixed component in the predetermined overhead rate is $93.94 per machine-hour. Thus, the correct answer is C.

Odonell Corporation Estimates That Its Variable Manufacturing Overhead Is $11