The Bolen Company forecasts that total overhead for the current year will be $8,000,000 and that total machine hours will be 200,000 hours. Year to date, the actual overhead is $10,000,000 and the actual machine hours are 80,000 hours. If the Bolen Company uses a predetermined overhead rate based on machine hours for applying overhead, what is that overhead rate?

Question

Jaron Holland

Business

1 July, 04:04

The Bolen Company forecasts that total overhead for the current year will be $8,000,000 and that total machine hours will be 200,000 hours. Year to date, the actual overhead is $10,000,000 and the actual machine hours are 80,000 hours. If the Bolen Company uses a predetermined overhead rate based on machine hours for applying overhead, what is that overhead rate?

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Answers (1)

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Kyla Brady · Answer 1

Estimated manufacturing overhead rate = $40 per machine hour

Explanation:

Giving the following information:

The Bolen Company forecasts that total overhead for the current year will be $8,000,000 and that total machine hours will be 200,000 hours. Year to date, the actual overhead is $10,000,000 and the actual machine hours are 80,000 hours.

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

Estimated manufacturing overhead rate = 8,000,000/200,000 = $40 per machine hour