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:

Estimates made at the beginning of the year:
Estimated machine-hours		43,000
Estimated variable manufacturing overhead	$	6.92	per machine-hour
Estimated total fixed manufacturing overhead	$	1,090,050
Actual machine-hours for the year		40,900

The predetermined overhead rate for the recently completed year was closest to:

Multiple Choice

• $31.93 per machine-hour

• $32.27 per machine-hour

• $6.92 per machine-hour

• $25.35 per machine-hour

Answer 1

$32.27 per machine-hour

Explanation:

The computation of the predetermined overhead rate is shown below:

= predetermined fixed overhead rate + predetermined variable overhead rate

where,

Predetermined fixed overhead rate = (Fixed overhead cost ÷ estimated direct labor)

= $1,090,050 ÷ 40,900 direct labor

= $26.65

And, the predetermined variable overhead rate is $6.92

Now put these values to the above formula  

So, the value would equal to

= $26.65 + $6.92

= $33.57

It is closest to $32.27