Asked by Mercy Ikediuba on May 04, 2024
Verified
Valvano 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 $440,000, variable manufacturing overhead of $2.20 per machine-hour, and 50,000 machine-hours. The estimated total manufacturing overhead is closest to:
A) $440,000
B) $110,000
C) $440,002
D) $550,000
Predetermined Overhead Rate
An estimated rate used to allocate manufacturing overhead costs to products or job orders, based on a planned amount of activity.
Machine-Hours
A measure of production output or activity based on the number of hours machines are run, used in allocating machine-related costs to products.
Variable Manufacturing Overhead
Costs in the manufacturing process that fluctuate with the level of production output, such as utilities or materials.
- Derive the designated overhead rate through the application of different benchmarks, including machine-hours, labor-hours, and direct labor cost.
- Administer the dispersion of manufacturing overhead to jobs by leveraging the predetermined overhead rate.
Verified Answer
Fixed manufacturing overhead = $440,000
Variable manufacturing overhead = $2.20/machine-hour x 50,000 machine-hours = $110,000
Total manufacturing overhead = Fixed manufacturing overhead + Variable manufacturing overhead = $440,000 + $110,000 = $550,000
Therefore, the estimated total manufacturing overhead is closest to $550,000, which is answer choice D.
Learning Objectives
- Derive the designated overhead rate through the application of different benchmarks, including machine-hours, labor-hours, and direct labor cost.
- Administer the dispersion of manufacturing overhead to jobs by leveraging the predetermined overhead rate.
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