Question

Almaraz corporation has two manufacturing departments--forming and finishing. the company used the following data at the beginning of the year to calculate predetermined overhead rates: formingfinishingtotalestimated total machine-hours (mhs)7,0003,00010,000estimated total fixed manufacturing overhead cost$ 40,600 $8,100, $48,700 estimated variable manufacturing overhead cost per machine-hour $1.30, $2.80 assume that the company uses a plantwide predetermined manufacturing overhead rate based on machine-hours.

What is the plantwide predetermined manufacturing overhead rate based on machine-hours?
A) $4.87 per machine-hour
B) $5.78 per machine-hour
C) $4.87 per forming department machine-hour
D) $5.78 per finishing department machine-hour

Answer 1

To find the plantwide predetermined manufacturing overhead rate, add total fixed and variable overhead costs and then divide by total machine-hours. The calculated rate is $6.62 per machine-hour, which does not match any of the provided options.

Step-by-step explanation:

The student is inquiring about calculating the plantwide predetermined manufacturing overhead rate for Almaraz Corporation which has two manufacturing departments - forming and finishing.

To calculate this rate, one would combine the estimated total fixed manufacturing overhead costs with the total variable manufacturing overhead costs (calculated by multiplying the estimated variable cost per machine-hour with the estimated total machine-hours) and then divide that total by the estimated total machine-hours.

Let's do the math: Estimated total fixed overhead cost = $48,700. Total variable overhead cost for Forming is 7,000 MHs × $1.30/MH = $9,100, and for Finishing is 3,000 MHs × $2.80/MH = $8,400. The combined variable cost is $9,100 (Forming) + $8,400 (Finishing) = $17,500.

Adding this to the fixed overhead gives us $48,700 + $17,500 = $66,200. Finally, divide this sum by the total machine-hours: $66,200 ÷ 10,000 MHs = $6.62 per machine-hour. However, none of the options provided (A, B, C, D) correctly reflects this calculation.