Question

Precision Company estimates its machine-hour requirements for the four quarters to be 35,000 hours, 20,000 hours, 15,000 hours, and 30,000 hours respectively. The variable manufacturing overhead rate is $4 per machine-hour. The fixed manufacturing overhead is $50,000 per quarter, which includes $20,000 of depreciation expense.

A. What is the budgeted variable manufacturing overhead for the year?

$200,000

$260,000

$280,000

$400,000

B. What is the predetermined overhead rate for the year?

Answer 1

A. $400,000

B. $6 per machine hour

Step-by-step explanation:

A. The computation of budgeted variable manufacturing overhead is shown below:-

Budgeted variable overhead cost = Four quarters × Variable manufacturing overhead rate

= (35,000 + 20,000 + 15,000 + 30,000) × $4

= 100,000 × $4

= $400,000

B. The computation of predetermined overhead rate is shown below:-

Predetermined rate = Variable manufacturing overhead rate + Fixed manufacturing overhead) ÷ Total machine hours

= $400,000 + ($50,000 × $4) ÷ 100,000

= $6 per machine hour