Thomlin Company forecasts that total overhead for the current year will be $15,500,000 with 250,000 total machine hours. Year to date, the actual overhead is $16,000,000, and the actual machine hours are 330,000 hours. The predetermined overhead rate based on machine hours is
A) $48 per machine hour
B) $62 per machine hour
C) $45 per machine hour
D) $50 per machine hour

Question

Quizplus · Accepted Answer

Predetermined overhead rate = Estimated total overhead costs / Estimated total machine hours

Using the information given:

Predetermined overhead rate = ($15,500,000 / 250,000) = $62 per machine hour

Since the actual overhead is higher than the estimated overhead, this means that the predetermined overhead rate based on estimated machine hours is too low. However, the question asks for the predetermined overhead rate based on estimated machine hours, and we have calculated that to be $62 per machine hour. Therefore, choice B is the correct answer.

Thomlin Company Forecasts That Total Overhead for the Current Year