Exercise 15-5 (Part Level Submission) Duggan Company applies manufacturing overh

Question

Exercise 15-5 (Part Level Submission)

Duggan Company applies manufacturing overhead to jobs on the basis of machine hours used. Overhead costs are expected to total $316,000 for the year, and machine usage is estimated at 126,400 hours. For the year, $331,085 of overhead costs are incurred and 130,400 hours are used.

My Question is :

(a)

Compute the manufacturing overhead rate for the year. (Round answers to 2 decimal places, e.g. 1.25.)

Explanation / Answer

Predetermined overhead rate = Estimated overhead cost / Estimated machine hours

= 316000/126400 i.e 2.5 per hour

Actual overhead rate = Actual overhead / Actual machine hours

= 331085/130400 i.e 2.53899

Budgeted manufacturing overhead = 130400*2.5 i.e 326000

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