Michael & Co. expects overhead costs of $16,000 per month and direct production costs of $30 per unit. The estimated production activity for the current accounting period is as follows: $$\begin{array} { | c | c | c | c | c | }
\hline & 1 ^ { st} \text {Quarter } & 2 ^ { \text {nd } } \text { Quarter }& { 3 } ^ { \text {rd } }\text { Quarter } \text { Quarter } & 4 ^ { \text {th } } \text { Quarter } \
\hline \text { Units produced } & 10,500 & 6,000 & 6,000 & 9,500 \
\hline
\end{array}$$ The predetermined overhead rate based on units produced is: (Round the answer to 2 decimal places.)
A) $0.50 per unit.
B) $2.00 per unit.
C) $6.00 per unit.
D) $36.00 per unit.

Question

Michael & Co. expects overhead costs of $16,000 per month and direct production costs of $30 per unit. The estimated production activity for the current accounting period is as follows: $$\begin{array} { | c | c | c | c | c | } 
\hline & 1 ^ { st} \text {Quarter } & 2 ^ { \text {nd } } \text { Quarter }& { 3 } ^ { \text {rd } }\text { Quarter }   \text { Quarter } & 4 ^ { \text {th } } \text { Quarter } \
\hline \text { Units produced } & 10,500 & 6,000 & 6,000 & 9,500 \
\hline
\end{array}$$ The predetermined overhead rate based on units produced is: (Round the answer to 2 decimal places.)
A) $0.50 per unit.
B) $2.00 per unit.
C) $6.00 per unit.
D) $36.00 per unit.

Quizplus · Accepted Answer

The predetermined overhead rate based on units produced can be calculated with the formula:
Predetermined overhead rate = Estimated total overhead costs / Estimated total units of production

We are given that the estimated total overhead costs are $16,000 per month. To find the estimated total units of production, we add up the estimated production activity for the current accounting period: 2,000 + 3,000 + 1,000 = 6,000 units.

Using the formula above, we get:
Predetermined overhead rate = $16,000 / 6,000 units
Predetermined overhead rate = $2.67 per unit

However, the answer choices are rounded to 2 decimal places, so we need to round our answer to the nearest cent. The predetermined overhead rate based on units produced is therefore $2.67 per unit, which when rounded to 2 decimal places is $2.00 per unit.

Since none of the answer choices match $2.67 per unit, we choose the closest option, which is C, $6.00 per unit.

Michael & Co The Predetermined Overhead Rate Based on Units Produced Is: (Round