Part IV. Predetermined Overhead Cranston Company estimates the following overhea
ID: 2514301 • Letter: P
Question
Part IV. Predetermined Overhead
Cranston Company estimates the following overhead costs for the coming year:
Equipment depreciation $160,000
Equipment maintenance 60,000
Supervisory salaries 40,000
Factory rent 100,000
Total $360,000
Cranston is also budgeting $600,000 in direct labor costs and 15,000 machine hours for the coming year.
Required:
a.
b. Calculate the predetermined overhead rate using machine hours as the allocation base.
Explanation / Answer
b. Calculate the predetermined overhead rate using machine hours as the allocation base
Predetermine overhead rate = Estimated overhead/estimated machine hour
= 360000/15000
Predetermine overhead rate = 24 per machine hour