Question

Giannitti Corporation bases its predetermined overhead rate on the estimated machine-hours for the upcoming year. Data for the upcoming year appear below:

Estimated machine-hours 72,900
Estimated variable manufacturing overhead $ 3.50 per machine-hour
Estimated total fixed manufacturing overhead 838,710
The predetermined overhead rate for the recently completed year was closest to:________.
A. $6.66 per machine-hour
B. $10.50 per machine-hour
C. $8.69 per machine-hour
D. $15.00 per machine-hour

Answer 1

D. $15.00 per machine hour

Step-by-step explanation:

The computation of the predetermined overhead rate for the recently completed year is seen below;

First, we will calculate the fixed overhead rate.

Fixed overhead rate = Estimated total fixed manufacturing overhead / Estimated machine - hours

Fixed overhead rate = $838,710 / 72,900

Fixed overhead rate = $11.50

Then,

Predetermined overhead rate = Fixed overhead rate + Variable overhead rate

Predetermined overhead rate = $11.50 + $3.50

Predetermined overhead rate for the recently completed year was closest to $15.00 per machine hour