Gilchrist Corporation bases its predetermined overhead rate on the estimated machine-hours for the upcoming year. At the beginning of the most recently completed year, the Corporation estimated the machine-hours for the upcoming year at 79,000 machine-hours. The estimated variable manufacturing overhead was $7.38 per machine-hour and the estimated total fixed manufacturing overhead was $2,347,090. The predetermined overhead rate for the recently completed year was closest to:

A) $37.09 per machine-hour
B) $36.07 per machine-hour
C) $7.38 per machine-hour
D) $29.71 per machine-hour

Question

Zybrea Knight · Accepted Answer

Final Answer : A, Explanation :  The predetermined overhead rate is calculated by adding the estimated variable manufacturing overhead per machine-hour to the estimated total fixed manufacturing overhead divided by the estimated machine-hours. This gives ($7.38 + $2,347,090 / 79,000) = $37.09 per machine-hour.

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