Kelsh Company uses a predetermined overhead rate based on machine-hours to apply manufacturing overhead to jobs.The company has provided the following estimated costs for next year: Kelsh estimates that 5,000 direct labor-hours and 10,000 machine-hours will be worked during the year.The predetermined overhead rate per hour will be:
A)$6.80
B)$6.40
C)$3.40
D)$8.20

Question

Kelsh Company uses a predetermined overhead rate based on machine-hours to apply manufacturing overhead to jobs.The company has provided the following estimated costs for next year:  Kelsh estimates that 5,000 direct labor-hours and 10,000 machine-hours will be worked during the year.The predetermined overhead rate per hour will be:
A)$6.80 
B)$6.40 
C)$3.40 
D)$8.20

Quizplus · Accepted Answer

Estimated total manufacturing overhead = Estimated salary of production supervisor + Estimated indirect materials + Estimated rent on factory equipment
= $20,000 + $4,000 + $10,000
= $34,000
Predetermined overhead rate = Estimated total manufacturing overhead F1F1F1S1F1F1F10 Estimated total amount of the allocation base
= $34,000 F1F1F1S1F1F1F10 10,000 machine-hours
= $3.40 per machine-hour

Kelsh Company Uses a Predetermined Overhead Rate Based on Machine-Hours