Question

Campaign Company, which applies overhead to production on the basis of machine hours, reported the following data for the period just ended: Actual units produced: 12,000 Actual fixed overhead incurred: $730,000 Actual machine hours worked: 60,000 Budgeted fixed overhead: $720,000 Planned level of machine-hour activity: 50,000 If Campaign estimates four hours to manufacture a completed unit, the company's standard fixed overhead rate per machine hour would be: Multiple Choice $12.00. $14.40. $14.60. $15.00. None of the answers is correct.

Answer 1

Predetermined manufacturing overhead rate= $14.4 per machine hour

Step-by-step explanation:

Giving the following information:

Budgeted fixed overhead: $720,000

Planned level of machine-hour activity: 50,000

To calculate the predetermined overhead rate based on standard costs, we need to use the budgeted data:

Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Predetermined manufacturing overhead rate= 720,000 / 50,000

Predetermined manufacturing overhead rate= $14.4 per machine hour