Predetermined overhead rate
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Question 17: (1 point)
Keeran Corporation's flexible budget for two levels of activity appears below:
Cost Formula (per machine-hour) Activity
(in machine-hours)
6,000 6,100
Variable overhead costs:
Lubricants $3.4 $ 20,400 $ 20,740
Power 1 6,000 6,100
Total variable overhead cost $4.4 26,400 26,840
Fixed overhead costs:
Depreciation 18,480 18,480
Taxes 7,920 7,920
Total fixed overhead cost 26,400 26,400
Total overhead cost $52,800 $53,240
If the denominator level of activity is 6,000 machine-hours, the variable element in the predetermined overhead rate would be:
$4.4
$8.73
$10.78
$39.42
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The solution explains how to calculate the predetermined overhead rate.
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