Brothern Corporation bases its predetermined overhead rate on the estimated mach

Question

Brothern Corporation bases its predetermined overhead rate on the estimated machine-hours for the upcoming year. Data for the most recently completed year appear below: Estimates made at the beginning of the year: Estimated machine-hours 49,300 Estimated variable manufacturing overhead $ 6.37 per machine-hour Estimated total fixed manufacturing overhead $ 997,832 Actual machine-hours for the year 45,800 The predetermined overhead rate for the recently completed year was closest to:

$26.16 per machine-hour

$26.61 per machine-hour

$6.37 per machine-hour

$20.24 per machine-hour

Explanation / Answer

Calcualtion of predetermined overhead rate for the recently completed year :

Estimated machine-hours = 49,300

Estimated variable manufacturing overhead = $ 6.37 per machine-hour

Estimated total fixed manufacturing overhead = $ 997,832

Estimated Per machine-hour Fixed manufacturing overhead

=Total fixed manufacturing overhead / Estimated machine-hours

= $ 997,832/ 49300

= $20.24

Predetermined overhead rate for the recently completed year was closest to : variable manufacturing overhead per machine hour plus  Fixed manufacturing overhead per machine hour

= $20.24 + $6.37

= $26.61 per machine-hour

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