Question

A furniture manufacturer uses a standard costing system in which standard machine-hours (MHs) is the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below: Denominator level of activity 2,400 MHs Overhead costs at the denominator activity level: Variable overhead cost $ 25,430 Fixed overhead cost $ 27,370 The following data pertain to operations for the most recent period: Actual hours 2,300 MHs Standard hours allowed for the actual output 2,440 MHs Actual total variable manufacturing overhead cost $ 21,440 Actual total fixed manufacturing overhead cost $ 28,560 The predetermined overhead rate is closest to:

Answer 1

Predetermined manufacturing overhead rate= $22 per machine hour

Step-by-step explanation:

Giving the following formula:

Denominator level of activity 2,400 MHs

Variable overhead cost $ 25,430

Fixed overhead cost $ 27,370

To calculate the predetermined manufacturing overhead rate we need to use the following formula:

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

Predetermined manufacturing overhead rate= (25,430 + 27,370) / 2,400

Predetermined manufacturing overhead rate= $22 per machine hour