Arabica Manufacturing uses a predetermined overhead allocation rate based on the number of machine hours. At the beginning of the year, it estimated total manufacturing overhead costs to be $1,050,000 , total number of direct labor hours to be 5,000 , and total number of machine hours to be 26,000 hours. What was the predetermined overhead allocation rate? (Round your answer to the nearest cent.)

Question

Business

Belinda Gomez

3 February, 18:47

Arabica Manufacturing uses a predetermined overhead allocation rate based on the number of machine hours. At the beginning of the year, it estimated total manufacturing overhead costs to be $1,050,000 , total number of direct labor hours to be 5,000 , and total number of machine hours to be 26,000 hours. What was the predetermined overhead allocation rate? (Round your answer to the nearest cent.)

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Answers (1)

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Shania Holmes · Answer 1

Predetermined overhead rate = $40.38 per machine hour

Explanation:

Giving the following information:

Arabica Manufacturing uses a predetermined overhead allocation rate based on the number of machine hours.

At the beginning of the year, it estimated:

Total manufacturing overhead costs to be $1,050,000 .

Total number of direct labor hours to be 5,000 .

Total number of machine hours to be 26,000 hours.

Predetermined overhead rate = total estimated overhead for the period / total amount of allocation base

Predetermined overhead rate = 1050000/26000 = $40.38 per machine hour