Question

Using the information provided by Amilmar Incorporated, calculate the predetermined overhead rate. Amilmar has determined machine hours to be the appropriate cost driver to allocate overhead costs. What is the predetermined overhead rate?

Answer 1

The predetermined overhead rate is calculated by dividing the estimated overhead costs by the estimated amount of the cost driver, which in this case is machine hours.

Step-by-step explanation:

The predetermined overhead rate is calculated by dividing the estimated overhead costs by the estimated amount of the cost driver, which in this case is machine hours. The formula to calculate the predetermined overhead rate is: Predetermined Overhead Rate = Estimated Overhead Costs / Estimated Machine Hours. For example, if Amilmar Incorporated estimates its total overhead costs to be $50,000 and expects to use 10,000 machine hours, then the predetermined overhead rate would be $5 ($50,000 / 10,000 machine hours).