Question

Martinez, Inc. manufactures a set of high-end computer storage systems for use by offices around the city. At the start of 2021, management built the budget for the upcoming year. The manufacturing department of Martinez, Inc. estimated 12,000 units to be produced, $1.69 per unit of production in variable manufacturing overhead and $360,000 in total fixed costs for 2021. Assuming Martinez, Inc. applies manufacturing overhead based on the actual number of units produced, what is the predetermined overhead rate for the year? Round your final answer to two decimals.

Answer 1

$30 per unit

Step-by-step explanation:

Predetermined overhead rate for the year is computed as;

= Estimated manufacturing overhead / Estimated units to be produced

Given that;

Estimated manufacturing overhead = $360,000

Estimated units to be produced = 12,000 units

Predetermined overhead rate = $360,000/12,000 = $30 per unit