Paulson Corporation uses a predetermined overhead rate based on machine-hours to apply manufacturing overhead to jobs. The Corporation has provided the following estimated costs for next year: Paulson estimated that 40,000 direct labor-hours and 20,000 machine-hours would be worked during the year. The predetermined overhead rate per machine-hour will be:

Question

Paulson Corporation uses a predetermined overhead rate based on machine-hours to apply manufacturing overhead to jobs. The Corporation has provided the following estimated costs for next year:  Paulson estimated that 40,000 direct labor-hours and 20,000 machine-hours would be worked during the year. The predetermined overhead rate per machine-hour will be:

Quizplus · Accepted Answer

To calculate the predetermined overhead rate per machine-hour, we need to divide the estimated total manufacturing overhead by the estimated total machine-hours. 
$84,000 ÷ 40,000 machine-hours = $2.10 per machine-hour. Therefore, the answer is B.

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