Question

​Aaron, Inc. estimates direct labor costs and manufacturing overhead costs for the coming year to be $ 770 comma 000 and $ 550 comma 000​, respectively. Aaron allocates overhead costs based on machine hours. The estimated total labor hours and machine hours for the coming year are 20 comma 000 hours and 5 comma 000 ​hours, respectively. What is the predetermined overhead allocation​ rate? (Round your answer to the nearest​ cent.)

Answer 1

Estimated manufacturing overhead rate= $110 per machine hour

Step-by-step explanation:

Giving the following information:

Estimated manufacturing overhead costs= $550,000.

Aaron allocates overhead costs based on machine hours.

The estimated total machine hours= 5,000 ​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= 550,000/5,000= $110 per machine hour