The management of predetermined overhead rate on activity at capacity. The compa
ID: 2340285 • Letter: T
Question
The management of predetermined overhead rate on activity at capacity. The company's controller has provided an example to illustrate how this new system would work. In this example, the allocation base is machine-hours and the estimated amount of the allocation base for the upcoming year is 69.000 machine-hours. Capacity is 92.000 machine-hours and the actual level of activity for the year is assumed to be 75.000 machine-hours. All of the manufacturing overhead is fixed and both the estimated amount at the beginning of the year and the actual amount at the end of the year are assumed to be $772.800 per year. It is assumed that a number of jobs were worked on during the year, one of which was Job Q20L which required 380 machine-hours. would like to investigate the possibility of basing its If the company bases its predetermined overhead rate on the estimated amount of the allocation base for the upcoming year, then the predetermined overhead rate is closest to: Multiple Choice $10.30 per machine-hour S773 per machine-hour 51120 per mechine-hour $8.40 per machine-hourExplanation / Answer
Estimated machine hours = 69,000 machine hours
Manufacturing overhead = $772,800
Predetermined overhead rate = Manufacturing overhead/Estimated machine hours
Predetermined overhead rate = $772,800 / 69,000 machine hours = $11.20
Hence, correct answer is $11.20 per machine hour
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