Question

The management of Blue Ocean Company estimates that 50,000 machine-hours will be required to support the production planned for the year. It also estimates $300,000 of total fixed manufacturing overhead cost for the coming year and $4 of variable manufacturing overhead cost per machine-hour. What is the predetermined overhead rate? $10.00 per machine-hour $12.50 per machine-hour $8.00 per machine-hour $6.00 per machine-hour

Answer 1

$10 per MH

Step-by-step explanation:

Estimated total overhead cost = $300,000 + ($4 per MH × 50,000 MHs) = $500,000

Predetermined overhead rate = Estimated total overhead cost of $500,000 ÷ 50,000 MHs = $10 per MH

Answer 2

$6.00 per machine-hour

Step-by-step explanation:

Total estimated manufacturing overhead = $300,000

Estimated machine hours = 50,000 hours

Predetermined overhead rate = Total estimated manufacturing overhead / Estimated machine hours

Predetermined overhead rate = $300,000 / 50,000 machine hours

Predetermined overhead rate = $6 per machine hour

So, The correct asnwer is $6.00 per machine-hour.