Question

Precision Company estimates its machine-hour requirements for the four quarters to be 35,000 hours, 20,000 hours, 15,000 hours, and 30,000 hours respectively. The variable manufacturing overhead rate is $4 per machine-hour. The fixed manufacturing overhead is $50,000 per quarter, which includes $20,000 of depreciation expense. 1. What is the budgeted variable manufacturing overhead for the year?a. $200,000
b. $260,000
c. $280,000
d. $400,0002.What is the predetermined overhead rate for the year?
a. $2 per machine hour
b. $4 per machine hour
c. $5 per machine hour
d. $6 per machine hour

Answer 1

Answer

1. D 400,000

2. D 6

Explanation:

a.Variable manufacturing overhead for the year = Variable manufacturing overhead rate per machine-hour × Total machine-hours required for the year

$4× 100,000 machine-hours

= $400, 000

b.Predetermined overhead rate = (Variable manufacturing overhead + Fixed manufacturing overhead) / Total machine-hours required

($4 × 100,000 machine- hours) + ($50,000 per quarter × 4 quarters) / 100,000

=($400,000 + $200,000) / 100,000 machine-hours.

= $600,000/100,000 = $6 per machine hours