Question

EA4.

LO 6.1Cozy, Inc., manufactures small and large blankets. It estimates $350,000 in overhead during the manufacturing of 75,000 small blankets and 25,000 large blankets. What is the predetermined overhead rate if a small blanket takes 1 machine hour and a large blanket takes 2 machine hours?

Answer 1

$2.8

Step-by-step explanation:

Given that,

Overhead during the manufacturing of blankets = $350,000

Small blankets manufactured = 75,000

Large blankets manufactured = 25,000

Therefore,

Predetermined overhead rate:

= Overhead during the manufacturing ÷ (Estimated hours in the allocation base)

= $350,000 ÷ [(75,000 × 1) + (25,000 × 2)]

= $350,000 ÷ 125,000

= $2.8