Orange Company computes its predetermined overhead rate on the basis of machine

Question

Orange Company computes its predetermined overhead rate on the basis of machine hours. Estimated machine hours at the beginning of the year are 4,000 and actual machine hours at the end of the year are 4,200. Estimated total manufacturing overhead costs at the beginning of the year are $20,000 and actual total manufacturing overhead costs at the end of the year are $19,000. The predetermined overhead rate for Orange Company would be:

$4.75 per machine hour

$4.52 per machine hour

$5.00 per machine hour

$4.76 per machine hour

$4.75 per machine hour

$4.52 per machine hour

$5.00 per machine hour

$4.76 per machine hour

Explanation / Answer

Predetermined overhead rate

= Estimated overhead / Estimated machine hours

= $20,000 / 4,000

= $5 per machine hour

So, as per above calculations, option C is the correct option

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