Question

A furniture manufacturer uses a standard costing system in which standard machine-hours (MHs) is the measure of activity. Data from the company's flexible budget for manufacturing overhead are given below:

Denominator level of activity		3,300	MHs
Overhead costs at the denominator activity level:
Variable overhead cost	$	37,200
Fixed overhead cost	$	38,370

The following data pertain to operations for the most recent period:

Actual hours		3,200	MHs
Standard hours allowed for the actual output		3,340	MHs
Actual total variable manufacturing overhead cost	$	30,440
Actual total fixed manufacturing overhead cost	$	39,560

The predetermined overhead rate is closest to:

Multiple Choice

• $23.62 per hour

• $22.90 per hour

• $21.88 per hour

• $21.21 per hour

Answer 1

B. $22.90 per hour

Predetermined overhead rate = Estimated overhead cost / Estimated machine hours

Predetermined overhead rate = ($37,200 + $38,370) / 3,300 MHs

Predetermined overhead rate = $22.90 per hour