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Reamer Company uses a predetermined overhead rate based on machine hours to apply manufacturing overhead to jobs. The company has provided the following estimated costs for the next year: Direct materials - $1000, Direct labor - $3000, Sales commissions - $4000, Salary of production supervisor - $2000, Indirect materials - $400, Advertising expense - $800, Rent on factory equipment - $1000. Reamer estimates that 500 direct labor hours and 1000 machine hours will be worked during the year. The predetermined overhead rate per hour will be:__________
A. $6.80
B. $6.00
C. $3.00
D. $3.40

Sagot :

Answer:

D. $3.40

Explanation:

The computation of the predetermined overhead rate is shown below:

Predetermined overhead rate is

= Estimated manufacturing overhead ÷ estimated machine hours

= ($2,000 + $400 + $1,000) ÷ (1,000 machine hours)

= $3,400 ÷ $1,000 machine hours

= $3.40 per hour

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