Crowson 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 the following data: ?Total machine-hours50,000?Total fixed manufacturing overhead cost$390,000?Variable manufacturing overhead per machine-hour$3.60Required:Calculate the predetermined overhead rate for the year.
What will be an ideal response?
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) = $390,000 + ($3.60 per machine-hour × 50,000 machine-hours) = $390,000 + $180,000 = $570,000
Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base = $570,000 ÷ 50,000 machine-hours = $11.40 per machine-hour
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