Question

Estimated total manufacturing overhead costs $750,000
Actual total manufacturing overhead costs $ 765,000
Estimated machine hours 200,000 hours
Actual machine hours 198,000 hours
1. Using the information provided by Amilmar Inc., calculate the predetermined overhead rate. Amilmar has determined machine hours to be the appropriate cost driver to allocate overhead costs.
a. $3.79.
b. $1.02.
c. $3.75.
d. $3.86.
2. Amilmar Inc. has provided this information regarding its overhead costs. It has determined machine hours to be the appropriate cost driver to allocate overhead costs. What will be the total overhead costs applied during the year?
a. $750,000.
b. $765,000.
c. $742,500.
d. $772,727.

Answer 1

The predetermined overhead rate and Applied over costs are $3.75 per machine hour and $742,500

What is predetermined overhead rate?

A predetermined overhead rate is an allocation rate that is used to apply the estimated cost of manufacturing overhead to cost objects.

Predetermined overhead rate

= estimated total manufacturing overhead costs / estimated machine hours

= 750,000 / 200000

= $3.75 per machine hour

Applied overhead costs

= Actual machine hours * predetermined overhead rate

= 198,000 * 3.75

= $742,500

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