Question

Collossal Company uses a predetermined rate to apply overhead. At the beginning of the year, Collossal estimated its overhead costs at $240,000, direct labor hours at 40,000, and machine. hours at 10,000. Actual overhead costs incurred were $249,280, actual direct labor hours were 41,000, and actual machine hours were. 11,000.

If the predetermined overhead rate is based on machine hours, what is the total amount credited to the Factory Overhead account for the year for Collossal?

a. $264,000
b. $246.000
c. $240,000
d. $249,280

Answer 1

Using the predetermined overhead rate based on machine hours, Collossal Company credited a total of $264,000 to the Factory Overhead account for the year.

Step-by-step explanation:

The question relates to calculating the total amount credited to the Factory Overhead account for Collossal Company using a predetermined overhead rate based on machine hours. To find this amount, we first need to calculate the predetermined overhead rate by dividing the estimated overhead costs by the estimated machine hours:

Predetermined overhead rate = Estimated overhead costs / Estimated machine hours

So: Predetermined overhead rate = $240,000 / 10,000 machine hours = $24/hour

Next, we apply this rate to the actual machine hours:

Total credited to Factory Overhead = Predetermined overhead rate x Actual machine hours

Total credited to Factory Overhead = $24/hour x 11,000 hours = $264,000

Therefore, the total amount credited to the Factory Overhead account for Collossal Company is $264,000 for the year.