Question

2 Tallahassee Company is highly automated and uses a computer to control manufacturing operations. Tallahassee uses hours. The estimates below were used in preparing the predetermined OH rate at the beginning of the year: a job-order costing system and applies manufacturing overhead (MOH) cost to products on the basis of computer During the year, a severe economie recession resulted in the cutting back production and the building of inventory in activity (within the relevant range). impossible to determine whether variable and fixed costs will increase or de D. Per unit variable cost increases as the level of activity increases (within the relevant range) E Per unit fixed cost decreases as the level of activity increases (within the relevant range). Fixed MOH cost s 1,275,000 Variable MOH per computer hour s 3.00 Computer hours 85,000 hrs year: Computer-hours 60,000 Manufacturing overhead cost $1,350,000 Balances at year-end: Work-in-process Inventory $160,000 Finished Goods Inventory $1,040,000 Costs of Good Sold $2,800,000 What is the predetermined overhead rate for the year? A $15.00 per hour B. $21.25 per hour $22.50 per hour D $18.00 per hour E $15.88 per hour POHR = Est. mered mot Estimated Base Applied - POHRX Actual 1350,000 60,000 60,000 Page 2 of 3

Answer 1

1,275,000 255,000 Estimated Fixed Manufacturing Overhead $ Estimated Variable Manufacturing Overhead $ (85,000 hours x $3) Estimated Manufactuirng Overhead Cost $ Divided by : Number of Computer Hours Predetermined Overhead Rate $ 1,530,000 85000 18.00 Per Hour Note : Do comment for any further assistance