Cavy Company estimates that the factory overhead for the following year will be $1,470,000. The company has decided that the basis for applying factory overhead should be machine hours, which is estimated to be 40,000 hours. Compute the predetermined overhead rate to apply factory overhead.

Predetermined Overhead Rate

An estimated rate used to allocate manufacturing overhead costs to individual units of production.

Factory Overhead

The indirect costs involved in manufacturing beyond direct materials and labor costs, including expenses like equipment maintenance, utilities, and factory management salaries.

Machine Hours

Machine hours refer to the total time that a piece of machinery or equipment is operated within a specific period, often used as a basis for allocating manufacturing overhead costs.