Wolle Corporation estimates that its variable manufacturing overhead is $11.60 per machine-hour and its fixed manufacturing overhead is $298,936 per period.
-If the denominator level of activity is 4,300 machine-hours, the fixed element in the predetermined overhead rate would be:
A) $81.12
B) $11.60
C) $69.52
D) $1,160.00

Question

Quizplus · Accepted Answer

The predetermined overhead rate formula is:

Predetermined overhead rate = (Estimated total manufacturing overhead cost) / (Estimated total units in the allocation base)

First, calculate the total estimated manufacturing overhead:

Fixed manufacturing overhead = $298,936
Variable manufacturing overhead = $11.60 x 4,300 = $49,880

Total estimated manufacturing overhead = $298,936 + $49,880 = $348,816

Next, calculate the predetermined overhead rate:

Predetermined overhead rate = $348,816 / 4,300 = $81.12

The fixed element in the predetermined overhead rate is equal to the fixed manufacturing overhead component of the total estimated manufacturing overhead, which is $298,936. Therefore, the fixed element is $298,936 / 4,300 = $69.52. The correct answer is C.

Wolle Corporation Estimates That Its Variable Manufacturing Overhead Is $11