The predetermined overhead rate (variable and fixed) is $7.50 per machine-hour and the denominator activity level is 135,000 machine-hours. If the variable portion of the predetermined overhead rate is $3.00 per machine-hour, then the budgeted fixed factory overhead for the year is:
A) $30,000
B) $607,500
C) $405,000
D) $1,012,500

Question

Quizplus · Accepted Answer

The budgeted fixed factory overhead is the predetermined overhead rate multiplied by the denominator activity level minus the variable portion of the predetermined overhead rate multiplied by the denominator activity level.Budgeted fixed factory overhead = ($7.50 per machine-hour * 135,000 machine-hours) - ($3.00 per machine-hour * 135,000 machine-hours)= $1,012,500 - $405,000= $607,500

The Predetermined Overhead Rate (Variable and Fixed) Is $7