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:

Answer 1

In getting the predetermined overhead rate, the estimated total manufacturing overhead should be divided to the total amount of the allocation base. With that, the formula should be like this:

Estimated total manufacturing overhead = $230,200 + ($6.82 per machine-hour X 10,000 machine-hours) = $298,400

overhead rate = $298,400 / 10,000 = $29.84