Hairr Corporation bases its predetermined overhead rate on variable manufacturing overhead cost of $9.50 per machine-hour and fixed manufacturing overhead cost of $947,672 per period. If the denominator level of activity is 8,900 machine-hours, the predetermined overhead rate would be:
A)$9.50
B)$115.98
C)$106.48
D)$950.00

Question

Quizplus · Accepted Answer

The predetermined overhead rate is calculated by dividing the total manufacturing overhead cost by the denominator level of activity. In this case, the total manufacturing overhead cost is $947,672 + (8,900 machine-hours x $9.50 per machine-hour) = $1,036,172. The predetermined overhead rate is therefore $1,036,172 / 8,900 machine-hours = $115.98 per machine-hour.

Hairr Corporation Bases Its Predetermined Overhead Rate on Variable Manufacturing