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Part IV. Predetermined Overhead            Cranston Company estimates the following overhead costs for the coming year:...

Part IV. Predetermined Overhead

           Cranston Company estimates the following overhead costs for the coming year:

Equipment depreciation                               $160,000

Equipment maintenance                                   60,000

Supervisory salaries                                         40,000

Factory rent                                                   100,000

Total                                                           $360,000

Cranston is also budgeting $600,000 in direct labor costs and 15,000 machine hours for the coming year.

Required:

a.

                       

b. Calculate the predetermined overhead rate using machine hours as the allocation base.

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Answer #1

b. Calculate the predetermined overhead rate using machine hours as the allocation base

Predetermine overhead rate = Estimated overhead/estimated machine hour

                                               = 360000/15000

Predetermine overhead rate = 24 per machine hour

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