Question

X Company has the following estimated costs for 2020: Direct materials Direct labor Factory supplies Factory maintenance Marketing research Factory rent Sales salaries Factory insurance $60,700 14,300 20,300 30,000 45,900 47,900 50,000 63,400 X Company estimates that direct labor hours for the year will be 1,100, and machines will be operated for 68,000 hours. If overhead is allocated on the basis of machine hours, what will the 2020 overhead rate be? 11.3

Answer 1

Estimated manufacturing overhead = Factory supplies + Factory maintenance + Factory rent + Factory insurance

= 20,300+30,000+47,900+63,400

= $161,600

Estimated machine hours = 68,000

Predetermined overhead = Estimated manufacturing overhead / Estimated machine hours

= 161,600/68,000

= $2.38 per machine hour

Overhead allocated on the basis of machine hours = $2.38 per machine hour

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