Lupo 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: Recently, Job T687 was completed with the following characteristics:
The predetermined overhead rate is closest to:

A) $12.60 per machine-hour
B) $10.50 per machine-hour
C) $8.40 per machine-hour
D) $2.10 per machine-hour

Question

Lupo 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:

Recently, Job T687 was completed with the following characteristics:

The predetermined overhead rate is closest to:

A) $12.60 per machine-hour
B) $10.50 per machine-hour
C) $8.40 per machine-hour
D) $2.10 per machine-hour

Mikelle Carter · Accepted Answer

Final Answer : B, Explanation :  To calculate the predetermined overhead rate, we add up the total estimated overhead costs and divide by the total estimated machine-hours.Total estimated overhead costs = $420,000 + $140,000 = $560,000Total estimated machine-hours = 40,000 + 20,000 = 60,000Predetermined overhead rate = $560,000 / 60,000 machine-hours = $9.33 per machine-hourTherefore, the closest answer is B) $10.50 per machine-hour.

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