Billa Corporation bases its predetermined overhead rate on variable manufacturing overhead cost of $11.70 per machine-hour and fixed manufacturing overhead cost of $341,596 per period.If the denominator level of activity is 4,700 machine-hours, the predetermined overhead rate would be:
A)$11.70
B)$72.68
C)$84.38
D)$1,170.00

Question

Quizplus · Accepted Answer

Predetermined overhead rate = (Variable manufacturing overhead cost + Fixed manufacturing overhead cost) / Denominator level of activity
= ($11.70 x 4,700) + $341,596 / 4,700
= $55,089 + $72.68
= $84.38 
Therefore, the predetermined overhead rate is $84.38 per machine-hour, so the correct answer is C. Fixed component of predetermined overhead rate = Estimated total fixed manufacturing overhead cost ÷ Estimated total amount of the allocation base
= $341,596 ÷ 4,700 machine-hours = $72.68 per machine-hour
Predetermined overhead rate = $11.70 per machine-hour + $72.68 per machine-hour = $84.38 per machine-hour

Billa Corporation Bases Its Predetermined Overhead Rate on Variable Manufacturing