capacity The company\'s controller has provided an example to lustrate how this

Question

capacity The company's controller has provided an example to lustrate 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 79,000 machine-hours. Ca The n nt of Holdaway Corporation would like to investigate the possiblity of basing its predetermined overhead rate on activity at and the actual level of activity for the year is assumed to be 74,900 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 $5,700,640 per pacity is 88,000 year. For simplicity, it is assumed that this is the capacity itis further assumed that this is also the actual amount of manufacturing overhead for the year If the company bases its predetermined estimated manufacturing overhead for the year as well as the manufacturing overhead at overhead rate on capacity, then the predetermined overhead rate is closest to:

Explanation / Answer

Calculate predetermine overhead rate :

Predetermine overhead rate = Estimated ovehread/capacity machine hour

                                        = 5700640/88000

Predetermine overhead rate = 64.78 per machine hour

so answer is d) $64.78

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