Hibshman Corporation bases its predetermined overhead rate on the estimated machine-hours for the upcoming year. At the beginning of the most recently completed year, the Corporation estimated the machine-hours for the upcoming year at 10,000 machine-hours. The estimated variable manufacturing overhead was $6.82 per machine-hour and the estimated total fixed manufacturing overhead was $230,200. The predetermined overhead rate for the recently completed year was closest to:
A)$29.84 per machine-hour
B)$23.15 per machine-hour
C)$23.02 per machine-hour
D)$6.82 per machine-hour

Question

Quizplus · Accepted Answer

The predetermined overhead rate is calculated by dividing the total estimated manufacturing overhead by the estimated machine-hours. In this case, the total estimated manufacturing overhead is $230,200 + (10,000 machine-hours x $6.82 per machine-hour) = $298,400. Therefore, the predetermined overhead rate is $298,400 / 10,000 machine-hours = $29.84 per machine-hour.

Hibshman Corporation Bases Its Predetermined Overhead Rate on the Estimated