Question

Ikerd Company applies manufacturing overhead to jobs on the basis of machine hours used. Overhead costs are estimated to total $348,425 for the year, and machine usage is estimated at 126,700 hours. For the year, $399,060 of overhead costs are incurred and 130,500 hours are used.

Compute the manufacturing overhead rate for the year.

Answer 1

Estimated manufacturing overhead rate= $2.75 per machine hour

Step-by-step explanation:

Giving the following information:

Overhead costs are estimated to total $348,425 for the year, and machine usage is estimated at 126,700 hours.

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

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

Estimated manufacturing overhead rate= 348,425/126,700= $2.75 per machine hour