Gilchrist Corporation bases its predetermined overhead rate on the estimated mac

Question

Gilchrist 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 21,200 machine-hours. The estimated variable manufacturing overhead was $5.32 per machine- hour and the estimated total fixed manufacturing overhead was $600,172. The predetermined overhead rate for the recently completed year was closest to: Multiple Choice $33.63 per machine-hour $5.32 per machine-hour $32.63 per machine-hour $28.31 per machine-hour

Explanation / Answer

A. $33.63 per machine-hour

Estimated total manufacturing overhead = $600,172 + ($5.32 per machine-hour × 21,200 machine-hours) = $712,956

Predetermined overhead rate = Estimated total manufacturing overhead ÷ Estimated total amount of the allocation base = $712,956 ÷ 21,200 machine-hours = $33.63 per machine-hour

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