Wiley Corporation bases its predetermined overhead rate on variable manufacturing overhead cost of $13.90 per machine-hour and fixed manufacturing overhead cost of $944,300 per period. If the denominator level of activity is 7,100 machine-hours, the predetermined overhead rate would be:
A) $1,390.00
B) $146.90
C) $13.90
D) $133.00

Question

Quizplus · Accepted Answer

The predetermined overhead rate is calculated by dividing the total overhead cost (variable and fixed) by the denominator level of activity. 
Total overhead cost = Variable manufacturing overhead cost + Fixed manufacturing overhead cost 
= $13.90 per machine-hour x 7,100 machine-hours + $944,300 
= $194,990 
Predetermined overhead rate = Total overhead cost / Denominator level of activity 
= $194,990 / 7,100 machine-hours 
= $146.90 per machine-hour (rounded to the nearest cent) 
Therefore, the correct answer is B.

Wiley Corporation Bases Its Predetermined Overhead Rate on Variable Manufacturing