Final answer:
The predetermined overhead rate for Walton Corporation is calculated by combining their fixed overhead with their variable overhead, then dividing by expected machine hours. This results in a predetermined rate of $2.80 per machine hour. Option c.
Step-by-step explanation:
Walton Corporation is looking to develop a single predetermined overhead rate. The total fixed overhead costs are $340,000, and the variable overhead cost is $2 per machine hour. Walton expects to operate at 425,000 machine hours. To calculate the predetermined overhead rate per machine hour, we must add the fixed and variable costs and then divide by the total machine hours.
The fixed overhead cost does not change with the number of machine hours, so it remains at $340,000. However, the variable cost per machine hour is $2, which for 425,000 machine hours amounts to $850,000 ($2 x 425,000 hours). Therefore, the total overhead cost for the expected machine hours is the sum of the fixed and variable costs: $340,000 + $850,000 = $1,190,000.
Finally, we divide this total overhead by the expected machine hours to find the predetermined overhead rate: $1,190,000 / 425,000 hours = $2.80 per machine hour. Hence, the correct answer is c.$2.80.