Pohl Corporation uses a standard cost system in which manufacturing overhead is applied on the basis of standard machine-hours. For June, the company's manufacturing overhead flexible budget showed the following total budgeted costs at a denominator activity level of 20,000 machine-hours:

During June, 17,000 machine-hours were used to complete 13,000 units of product, and the following actual total overhead costs were incurred:

At standard, each unit of finished product requires 1.4 hours of machine time.

-The total predetermined overhead rate per machine-hour for June was:
A)$2.57 per machine-hour
B)$1.30 per machine-hour
C)$2.80 per machine-hour
D)$3.15 per machine-hour

Question

Pohl Corporation uses a standard cost system in which manufacturing overhead is applied on the basis of standard machine-hours. For June, the company's manufacturing overhead flexible budget showed the following total budgeted costs at a denominator activity level of 20,000 machine-hours:

During June, 17,000 machine-hours were used to complete 13,000 units of product, and the following actual total overhead costs were incurred:

At standard, each unit of finished product requires 1.4 hours of machine time.

-The total predetermined overhead rate per machine-hour for June was:
A)$2.57 per machine-hour 
B)$1.30 per machine-hour 
C)$2.80 per machine-hour 
D)$3.15 per machine-hour

Quizplus · Accepted Answer

To calculate the predetermined overhead rate, we need to divide the estimated total manufacturing overhead costs by the estimated total machine-hours. From the data given in the question:
Estimated total manufacturing overhead costs = $280,000
Estimated total machine-hours = 100,000
Predetermined overhead rate = $280,000 / 100,000 machine-hours = $2.80 per machine-hour. Therefore, the correct answer is C.

Pohl Corporation Uses a Standard Cost System in Which Manufacturing