Dearden 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 total fixed manufacturing overhead cost of $144,000, variable manufacturing overhead of $2.00 per machine-hour, and 60,000 machine-hours. The predetermined overhead rate is closest to:

A) $2.40 per machine-hour
B) $6.40 per machine-hour
C) $4.40 per machine-hour
D) $2.00 per machine-hour

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Mujuji Nobel · Accepted Answer

Final Answer : C, Explanation :  To calculate the predetermined overhead rate, we add the total fixed manufacturing overhead cost ($144,000) to the variable manufacturing overhead cost per machine-hour ($2.00) and divide by the total machine-hours (60,000):(($144,000 + ($2.00 x 60,000)) / 60,000) = $4.40 per machine-hour

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