Smith Paints allocates overhead based on machine hours. Selected data for the mo
ID: 2422382 • Letter: S
Question
Smith Paints allocates overhead based on machine hours. Selected data for the most recent year follow.
Estimated manufacturing overhead cost
$250187
Actual manufacturing overhead cost
$245126
Estimated machine hours
20668
Actual machine hours
20753
The estimates were made as of the beginning of the year, while the actual results were for the entire year.
The predetermined manufacturing overhead rate per machine hour is? and explain if you can
Estimated manufacturing overhead cost
$250187
Actual manufacturing overhead cost
$245126
Estimated machine hours
20668
Actual machine hours
20753
Explanation / Answer
Solution: Predetermined manufacturing overhead rate per machine hour = 12.11 Working Notes: Predetermined manufacturing overhead rate per machine hour = Estimated manufacturing overhead cost / Estimated machine hours =$250,187/20,668 =$12.1050416 =$12.11 per machine hour Predetermined manufacturing overhead rate per machine hour =$12.11 Notes: Predetermined manufacturing overhead rate is derived at the beginning of the period during budget preparation and is calculated based of estimated manufacturing OH and Estimate machine hours Actual data of machine hours & manufacturing OH are available at the end of the period but, Predetermined OH rate is calculated at beginning , so it is calculated based on Estimated data Please feel free to ask if anything about above solution in comment section of the question.
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