Caple Corporation applies manufacturing overhead on the basis of machine-hours. At the beginning of the most recent year, the company based its predetermined overhead rate on total estimated overhead of $16,660. Actual manufacturing overhead for the year amounted to $25,000 and actual machine-hours were 1,460. The company's predetermined overhead rate for the year was $11.90 per machine-hour.The predetermined overhead rate was based on how many estimated machine-hours?
A) 1,400
B) 2,101
C) 2,742
D) 1,460

Question

Quizplus · Accepted Answer

Using the formula for predetermined overhead rate:
Predetermined overhead rate = Estimated total overhead / Estimated total machine-hours

The predetermined overhead rate is given as $11.90 per machine-hour. If we substitute this rate along with the actual manufacturing overhead of $25,000 and actual machine-hours of 1,460, we get:

$11.90 per machine-hour = $25,000 / 1,460 machine-hours

Solving for the estimated total machine-hours gives us 1,400 machine-hours. Therefore, the best choice is A) 1,400.

Caple Corporation Applies Manufacturing Overhead on the Basis of Machine-Hours