Dearden Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on machine-hours.The company based its predetermined overhead rate for the current year on total fixed manufacturing overhead cost of $144,000, variable manufacturing overhead of $2.00 per machine-hour, and 60,000 machine-hours.The predetermined overhead rate is closest to:

A) $2.40 per machine-hour
B) $6.40 per machine-hour
C) $4.40 per machine-hour
D) $2.00 per machine-hour

Question

Daniel Arboleda · Accepted Answer

Final Answer : C, Explanation :  Predetermined overhead rate = (Total fixed manufacturing overhead + Total variable manufacturing overhead) / Total machine-hoursPredetermined overhead rate = ($144,000 + (60,000 x $2.00)) / 60,000Predetermined overhead rate = ($144,000 + $120,000) / 60,000Predetermined overhead rate = $264,000 / 60,000Predetermined overhead rate = $4.40 per machine-hour Estimated total manufacturing overhead cost = Estimated total fixed manufacturing overhead cost + (Estimated variable overhead cost per unit of the allocation base × Estimated total amount of the allocation base)= $144,000 + ($2.00 per machine-hour × 60,000 machine-hours)= $144,000 + $120,000 = $264,000Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base = $264,000 ÷ 60,000 machine-hours = $4.40 per machine-hour

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