Ikerd Company applies manufacturing overhead to jobs on the basis of machine hours used. Overhead costs are estimated to total $348,425 for the year, and machine usage is estimated at 126,700 hours. For the year, $399,060 of overhead costs are incurred and 130,500 hours are used.

Compute the manufacturing overhead rate for the year.

Question

Lyric Wood

Business

8 August, 10:08

Ikerd Company applies manufacturing overhead to jobs on the basis of machine hours used. Overhead costs are estimated to total $348,425 for the year, and machine usage is estimated at 126,700 hours. For the year, $399,060 of overhead costs are incurred and 130,500 hours are used.

Compute the manufacturing overhead rate for the year.

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Answers (1)

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Ada Russell · Answer 1

Estimated manufacturing overhead rate = $2.75 per machine hour

Explanation:

Giving the following information:

Overhead costs are estimated to total $348,425 for the year, and machine usage is estimated at 126,700 hours.

To calculate the estimated manufacturing overhead rate we need to use the following formula:

Estimated manufacturing overhead rate = total estimated overhead costs for the period / total amount of allocation base

Estimated manufacturing overhead rate = 348,425/126,700 = $2.75 per machine hour