Question

Aaron, Inc. estimates direct labor costs and manufacturing overhead costs for the coming year to be $760,000 and $520,000, respectively. Aaron allocates overhead costs based on machine hours. The estimated total labor hours and machine hours for the coming year are 16,000 hours and 8000 hours, respectively. What is the predetermined overhead allocation rate

Answer 1

the Predetermined overhead rate is $95 per machine hour

Step-by-step explanation:

The computation of the predetermined overhead rate is shown below:

Predetermined overhead rate is

= (Estimated manufacturing overhead cost ÷ Estimated machine hours)

= ($760,000 ÷ 8000)

= $95 per machine hour

Hence, the Predetermined overhead rate is $95 per machine hour