Reamer Corporation uses a predetermined overhead rate based on machine-hours to apply manufacturing overhead to jobs.The Corporation has provided the following estimated costs for next year: Reamer estimates that 500 direct labor-hours and 1,000 machine-hours will be worked during the year.The predetermined overhead rate per hour will be:
A)$6.80 per machine-hour
B)$6.00 per machine-hour
C)$3.00 per machine-hour
D)$3.40 per machine-hour

Question

Reamer Corporation uses a predetermined overhead rate based on machine-hours to apply manufacturing overhead to jobs.The Corporation has provided the following estimated costs for next year:  Reamer estimates that 500 direct labor-hours and 1,000 machine-hours will be worked during the year.The predetermined overhead rate per hour will be:
A)$6.80 per machine-hour 
B)$6.00 per machine-hour 
C)$3.00 per machine-hour 
D)$3.40 per machine-hour

Quizplus · Accepted Answer

11ea7998_5f4d_de32_911b_e3ec08d8963b_TB2627_00_TB2627_00 Predetermined overhead rate = Estimated total manufacturing overhead ÷ Estimated total amount of the allocation base = $3,400 ÷ 1,000 machine-hours = $3.40 per machine-hour

Reamer Corporation Uses a Predetermined Overhead Rate Based on Machine-Hours