Hibshman Corporation bases its predetermined overhead rate on the estimated mach

Question

Hibshman Corporation bases its predetermined overhead rate on the estimated machine-hours for the upcoming year. At the beginning of the most recently completed year, the Corporation estimated the machine-hours for the upcoming year at 10,000 machine-hours. The estimated variable manufacturing overhead was $6.82 per machine-hour and the estimated total fixed manufacturing overhead was $230,200. The predetermined overhead rate for the recently completed year was closest to: Multiple Choice $29.84 per machine-hour $23.15 per machine-hour $23.02 per machine-hour $6.82 per machine-hour

Explanation / Answer

The predetermined overhead rate = (Total Overhead ) / Total machine-hours

= ( estimated total fixed manufacturing overhead  +  estimated total Variable manufacturing overhead ) / Total machine-hours

= [ ($ 230,200 ) + ( $ 6.82 * 10,000) ] / 10,000

= $ 29.84 per machine hour

Hence the correct answer is $ 29.84 per machine-hour

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