Aaron, Inc estimates direct labor costs and manufacturing overhead costs for the coming year to be $750,000 and $550,000, respectively
Aaron allocates overhead costs based on machine hours. The estimated total labor hours and machine hours for the coming year are 18,000 hours and 7,000 hours, respectively. What is the predetermined overhead allocation rate? (Round your answer to the nearest cent.)
A) $107.14 per machine hour
B) $30.56 per labor hour
C) $1.36 per labor hour
D) $78.57 per machine hour
D .D) Predetermined overhead allocation rate = Total estimated overhead costs / Total estimated quantity of the overhead allocation base
Predetermined overhead allocation rate = $550,000 / 7,000 machine hours = $78.57 per machine hour
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