Steele Corporation uses a predetermined overhead rate based on machine-hours to apply manufacturing overhead to jobs.Steele Corporation has provided the following estimated costs for next year:
Steele estimates that 10,000 direct labor-hours and 16,000 machine-hours will be worked during the year.The predetermined overhead rate per hour will be:
A) $4.25
B) $8.00
C) $9.00
D) $10.25

Question

Steele Corporation uses a predetermined overhead rate based on machine-hours to apply manufacturing overhead to jobs.Steele Corporation has provided the following estimated costs for next year:
 Steele estimates that 10,000 direct labor-hours and 16,000 machine-hours will be worked during the year.The predetermined overhead rate per hour will be:
A) $4.25 
B) $8.00 
C) $9.00 
D) $10.25

Quizplus · Accepted Answer

11ea7761_191e_7173_81a5_cba0c5a90972_TB2580_00 Predetermined overhead rate = Estimated total manufacturing overhead ÷ Estimated total amount of the allocation base
Predetermined overhead rate = $68,000 ÷ 16,000 machine-hours = $4.25 per machine-hour

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