Question

ABC Company estimates total overhead costs to be $1,200,000 and will apply overhead to units produced based on 200,000 estimated machine hours. During the year ABC Company incurred actual overhead costs of $1,250,000 and achieved 250,000 machine hours. ABC Company's predetermined overhead rate is:

Answer 1

$6 per machine hour

Step-by-step explanation:

Predetermined overhead rate=Estimated total overhead/Estimated machine hours

Predetermined overhead rate = $1,200,000 / 200,000 hours

Predetermined overhead rate = $6 per machine hour.

Thus, the predetermined overhead rate is $6 per machine hour