A manufacturing company uses a standard costing system in which standard machine-hours (MHs) is the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below: The following data pertain to operations for the most recent period:
-What is the predetermined overhead rate to the nearest cent?
A) $25.25
B) $24.97
C) $25.34
D) $25.06

Question

A manufacturing company uses a standard costing system in which standard machine-hours (MHs) is the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below:  The following data pertain to operations for the most recent period: 
-What is the predetermined overhead rate to the nearest cent?
A) $25.25 
B) $24.97 
C) $25.34 
D) $25.06

Quizplus · Accepted Answer

The predetermined overhead rate is calculated by dividing the total estimated overhead costs by the total estimated activity base. In this case, the total estimated overhead costs are $1,010,000 and the total estimated activity base is 40,000 direct labor hours. Therefore, the predetermined overhead rate is $1,010,000 / 40,000 = $25.25.

A Manufacturing Company Uses a Standard Costing System in Which