Question

Brothern Corporation bases its predetermined overhead rate on the estimated machine-hours for the upcoming year. Data for the most recently completed year appear below: 12 & 01:51:34 Estimates made at the beginning of the year: Estimated machine-hours Estimated variable manufacturing overhead Estimated total fixed manufacturing overhead Actual machine-hours for the year 38,300 $ 5.77 per machine-hour $1,028,738 34,800 The predetermined overhead rate for the recently completed year was closest to: Multiple Choice O $32.10 per machine-hour U $32.63 per machine-hour O $5.77 per machine-hour O $26.86 per machine-hour

Answer 1

Option (b) is correct

Since pre determined overhead rate is based on estimated machine hours, so,

Pre determined overhead rate = Total estimated factory overheads / Estimated machine hours

First we will calculate total factory overheads as below:

Total estimated factory overheads = Estimated Variable manufacturing overhead + Estimated Fixed manufacturing overhead

Total estimated factory overhead = ($5.77 * 38300) + $1028738

Total estimated factory overhead = $220991 + $1028738 = $1249729

Now,

Pre determined overhead rate = Total estimated factory overheads / Estimated machine hours

putting the values in the above formula, we get,

Pre determined overhead rate = $1249729 / 38300 = $32.63 per machine hour