Question

Ridley Company estimates that overhead costs for the next year will be $4,057,500 for indirect labor and $600,000 for factory utilities. The company uses machine hours as its overhead allocation base. If 115,000 machine hours are planned for this next year, what is the company's plantwide overhead rate

Answer 1

Predetermined manufacturing overhead rate= $40.5 per machine-hours

Step-by-step explanation:

Giving the following information:

Estimated overhead:

Indirect labor= $4,057,500

Factory utilities= $600,000

Total overhead= $4,657,500

Estimated machine-hours= 115,000

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

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

Predetermined manufacturing overhead rate= 4,657,500/115,000

Predetermined manufacturing overhead rate= $40.5 per machine-hours